SEC guidelines spark debate over stablecoin risks

The U.S. Securities and Exchange Commission (SEC) has issued new guidelines declaring certain stablecoins as "non-securities," exempting them from transaction reporting requirements. 

While the crypto industry largely welcomed this move, SEC Commissioner Caroline Crenshaw criticised the guidelines, arguing they misrepresent the risks of USD-pegged stablecoins.

Crenshaw, a vocal crypto critic, stated in an April 4 statement that the SEC’s analysis contains “legal and factual errors” that distort the reality of the stablecoin market. 

She emphasised that over 90% of USD-stablecoins are distributed through intermediaries, not directly from issuers, contrary to what the SEC implied.

Crenshaw also challenged the SEC’s assurance that issuers can handle unlimited redemptions based on reserve value. 

She argued that reserves alone do not reflect an issuer’s overall financial health, liabilities, or risk exposure. 

“Stablecoins always carry some risk, particularly during market downturns,” she added.

Despite Crenshaw’s criticisms, many in the crypto industry view the guidelines as progress. 

Ian Ballina, founder of Token Metrics, described them as a step toward focusing on critical issues within the crypto space. 

Tan Tran, CEO of Vemanti, expressed regret that such clarity wasn’t achieved earlier, while Ian Kane of Midnight Network called it “progress for crypto folks trying to play by the rules.”

The guidelines classify "covered stablecoins" as those fully backed by fiat reserves or highly liquid instruments redeemable at a 1:1 ratio with U.S. dollars. 

However, algorithmic stablecoins and yield-bearing tokens remain excluded from this definition.

The regulatory shift comes amid broader efforts to integrate stablecoins into global financial systems. 

Tether (CRYPTO:USDT), for example, has reportedly engaged a Big Four accounting firm to audit its reserves and verify its USDT backing.