SEC’s Take on USD-Stablecoins Is ‘Distorted and Misleading,’ Says Commissioner Crenshaw

The United States Securities and Exchange Commission (SEC) has recently released new stablecoin regulations—cryptocurrencies whose value is pegged to the value of traditional fiat currencies like the U.S. dollar. All in the crypto community are applauding what they see as progress, but there isn’t consensus. SEC Commissioner Caroline Crenshaw, who has been outspoken in her criticism of cryptocurrencies, has loudly protested, calling the new regulations misleading and flawed.

Crenshaw Claims SEC Is Downplaying Stablecoin Risks

In her April 4 release, Crenshaw attacked the SEC for providing a “distorted view” of the stablecoin market, stating the new rules minimize the financial risks the digital currencies present. The report is replete with legal and factual inaccuracies, and it gives a misleading impression that stablecoins are stable and available to retail investors, Crenshaw stated.

She was particularly critical of the SEC’s contention that stablecoins are offered temporarily by intermediaries. The truth, Crenshaw said, is that it is the rule, not the exception. “Over 90% of USD-stablecoins are only available to the public through intermediaries like crypto exchanges,” she stated.

New Guidelines Label Some Stablecoins as ‘Non-Securities’

The key to the new rules is that some stablecoins are now allowed to be deemed “non-securities,” meaning they’re exempt from some of the transaction reporting rules that normally apply to traditional financial instruments. The step was widely embraced by crypto companies, who view it as a sign that the SEC is finally starting to be more pragmatic, helpful in its approach to digital assets.

Industry Reaction: A Welcome, But Overdue, Change

Crypto leaders were quick to react positively. Token Metrics founder Ian Balina called the move “a clear step in prioritizing what truly matters in the crypto space.” Others, like Vemanti CEO Tan Tran, said they only wished the SEC would have done this a few years ago. Midnight Network executive Ian Kane called it “progress for those that are trying to play by the rules.”.

Despite the positive vibes from the crypto crowd, Crenshaw was not convinced. She argued that even if a stablecoin has as much backing as it has outstanding does not mean the issuer’s solvency or the coin’s long-term stability, especially under stress.

Crenshaw Warns of Deeper Financial Risks

Crenshaw indicated that reserves tell only half the story. She was cautious about the issuer’s hidden liabilities and risks through financial activities beyond the reserves. “You can’t gauge an issuer’s solvency by looking at their reserve values only,” she said.

Her warning comes after reports that the largest stablecoin issuer, Tether, is meeting with a Big Four accounting firm to guarantee its USDT token is backed 1:1. It is widely seen as an effort to shore up confidence ahead of a possible shift in regulatory sentiment under a hypothetical second term for crypto-friendly President Donald Trump.

Final Thoughts

Though the SEC’s latest stablecoin update represents a more pro-crypto trend, it is clear that there are still internal conflicts. Crenshaw’s subtle critique exposes the perpetual tension between supporting innovation and safeguarding investors—a balance regulators worldwide are still finding difficult to attain.

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