Crenshaw Accuses SEC of Presenting 'Distorted Picture' of USD Stablecoin Market

Caroline Crenshaw, a commissioner at the US Securities and Exchange Commission (SEC) and a prominent critic of cryptocurrency, has accused the agency of downplaying risks and inaccurately portraying the US stablecoin market in its recently released guidelines.

Despite her criticism, many in the crypto industry view the SEC's new guidelines—declaring stablecoins that meet specific criteria as "non-securities" and exempt from transaction reporting obligations—as a positive step.

In a statement on April 4, Crenshaw, who has consistently opposed spot Bitcoin ETFs, argued that the SEC’s stablecoin guidance includes "legal and factual mistakes" that present a "distorted view" of the USD-stablecoin market and significantly minimize its associated risks.

Crenshaw Disagrees, Crypto Industry Cheers

Crenshaw questioned the validity of the SEC's analysis in reaching its conclusion and pushed back against the agency's focus on actions by issuers that claim to stabilize prices, guarantee redeemability, and minimize risks.

Source: David Sacks

The SEC stated that "albeit briefly, some USD-stablecoins are only available to retail purchasers through intermediaries, not directly from the issuer."

Crenshaw contested this claim, labeling it misleading. She argued:

"It is not the exception, but the norm, that these coins are sold to retail users through intermediaries in the secondary market, such as crypto trading platforms."
"Over 90% of USD-stablecoins in circulation are distributed in this manner," Crenshaw added.

On the other hand, many in the crypto industry expressed optimism about the SEC's clearer guidelines on stablecoins.

Token Metrics founder Ian Ballina remarked that it “feels like a clear step in focusing on what truly matters in the crypto space.”

Crypto Industry Sees Positive Progress, But Thinks It's Overdue

Vemanti CEO Tan Tran wished the SEC had reached this conclusion three years ago, while Ian Kane, head of partnerships at Midnight Network, noted that it “feels like a step forward for crypto enthusiasts trying to follow the rules.”

In response, Crenshaw argued that it is "highly misleading" for the SEC to assure users that an issuer can handle unlimited redemptions just because their reserves match or surpass the total value of the supply.

Crenshaw argued that the financial health and solvency of the issuer cannot be assessed solely based on the value of its reserves, as this fails to account for its liabilities, risks from proprietary financial activities, and other factors.

She pointed out that stablecoins inherently carry some risk, particularly during periods of market decline.

This follows reports that Tether, a stablecoin issuer, has been working with a Big Four accounting firm to audit its reserves and ensure that its USDT stablecoin is fully backed at a 1:1 ratio.

On March 22, Tether CEO Paolo Ardoino noted that the audit process would be more straightforward under a pro-crypto US President Donald Trump.