SEC Commissioner Criticizes New Stablecoin Guidelines, Citing Misrepresentation of Risks

U.S. Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw has publicly criticized the regulator’s newly issued guidelines on stablecoins, accusing it of misrepresenting both legal interpretations and risk factors. Crenshaw, known for her hard stance against spot Bitcoin ETFs, argued that the SEC’s latest position downplays the vulnerabilities of the USD-backed stablecoin market and is riddled with both legal and factual flaws.

The new framework classifies certain stablecoins as “non-securities” and relaxes reporting requirements. However, Crenshaw contends that the agency glosses over critical safeguards and overstates the effectiveness of issuer mechanisms designed to reduce risk. She pushed back against the SEC’s conclusions, asserting they were misleading and failed to capture the true risks. Crenshaw stated, “It is the general rule, not the exception, that these coins are available to the retail public only through intermediaries who sell them on the secondary market, such as crypto trading platforms.” She added, “Over 90% of USD-stablecoins in circulation are distributed in this way.”

Crenshaw took issue with the SEC’s reassurances, calling it “grossly inaccurate” to suggest that issuers could handle unlimited redemptions simply because their reserves meet or exceed supply. She further explained, “The issuer’s overall financial health and solvency cannot be judged by the value of its reserve, which tells us nothing about its liabilities, risk from proprietary financial activities, and so forth.”

Crenshaw’s concerns come at a time when the stablecoin market is under increasing scrutiny. Just weeks prior, Tether had reportedly engaged a Big Four accounting firm to audit its asset reserves, ensuring its USDT stablecoin maintains a 1:1 backing. This coincided with the total transaction volume of stablecoins reaching $670.22 billion in March, with USDT leading, followed by USDC. In parallel, the U.S. House Financial Services Committee advanced the Republican-backed Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, passing it by a 32-17 vote on 2nd April. This legislative movement underscores the growing pressure for clearer oversight and accountability in the stablecoin sector.