SEC’s Stablecoin Rules Spark Clash: Crenshaw Slams ‘Distorted Picture,’ Industry Cheers Progress

A Regulator’s Rebellion

The U.S. Securities and Exchange Commission’s (SEC) April 4, 2025, stablecoin guidelines—labeling certain tokens as “non-securities”—have ignited a firestorm within and beyond the agency. Commissioner Caroline Crenshaw, a known crypto skeptic who famously opposed spot Bitcoin ETFs, unleashed a scathing critique, accusing the SEC of “legal and factual errors” that “paint a distorted picture of the USD-stablecoin market.” In her view, the rules gloss over risks, misleading investors. Yet, the crypto industry largely applauds the move as a long-awaited step toward clarity, revealing a stark divide over stablecoin regulation.

The Guidelines Under Fire

The SEC’s new framework dubs “covered stablecoins”—those fully backed by fiat or low-risk assets and redeemable 1:1 with USD—as exempt from securities reporting. It’s a nod to giants like USDT and USDC, provided they avoid yield offerings or reserve speculation. Crenshaw isn’t buying it. She disputes the SEC’s claim that issuer safeguards “stabilize price, ensure redeemability, and reduce risk,” calling it a flimsy narrative. “Over 90% of USD-stablecoins circulate via intermediaries like trading platforms, not direct from issuers,” she countered, slamming the SEC’s suggestion that retail access is limited as “grossly inaccurate.” For her, this secondary-market dominance amplifies unchecked vulnerabilities.

Industry Applause Meets Caveats

Crypto voices, meanwhile, see a glass half full. Token Metrics founder Ian Ballina praised the guidelines as “a clear step in focusing on what really matters,” while Vemanti CEO Tan Tran quipped, “Wish this came three years ago.” Midnight Network’s Ian Kane echoed the sentiment: “It’s progress for crypto folks playing by the rules.” The optimism isn’t blind—many see it as late but welcome relief in a regulatory maze. Tether’s recent push for a Big Four audit (reported March 22) aligns with this shift, with CEO Paolo Ardoino banking on a Trump-led pro-crypto climate to ease scrutiny.

Source: David Sacks

Crenshaw’s Risk Alarm

Crenshaw digs deeper, challenging the SEC’s rosy redemption assurances. “It’s misleading to say issuers can handle unlimited redemptions just because reserves match supply,” she argued. “Reserves don’t reveal liabilities, financial health, or proprietary risks.” She warns of stablecoin fragility—think market crashes or bank runs—where even “fully backed” tokens could falter. Her stance nods to Tether’s audit saga, where proving 1:1 backing remains a PR and regulatory tightrope. “Stablecoins always carry risk,” Crenshaw stressed, painting the SEC’s confidence as a house of cards.

A Tale of Two Visions

This clash lays bare a broader tension. Crenshaw’s dissent—rooted in investor protection—casts the guidelines as a reckless green light, especially as stablecoins balloon to a $170 billion market (per CoinGecko). The industry, weary of SEC foot-dragging, sees a lifeline for innovation, with X posts hailing “finally some clarity” amid Trump’s tariff noise (see prior coverage). Crenshaw’s not alone—her March ETF nay vote drew ire—but her stablecoin salvo lands as the SEC navigates a pro-crypto Senate shift with Paul Atkins’ nomination. For now, the guidelines stand, but her warning rings loud: progress can’t ignore peril.