A key challenge to the progress of stablecoin legislation is the dissenting stance of SEC Commissioner Caroline Crenshaw. According to TD Cowen, her criticism, coupled with a recent SEC declaration stating that certain stablecoins are not securities due to their reserve backing and redeemability, could impede legislative progress. Crenshaw argues that these declarations underestimate potential risks associated with such digital currencies and warns about the potential for intermediaries to not redeem stablecoins at a 1:1 ratio with the U.S. dollar, which would pose significant risk to investors. While regulatory drafts have been advanced by both chambers of Congress, internal disagreements within the SEC, particularly Crenshaw’s opposition, could hinder consensus on legislation, especially in the Senate where Democratic support is crucial.
Further complicating the issue is House Financial Services Committee Chair Maxine Waters’ concerns about former President Trump’s influence on cryptocurrency policy. She cautions that the proposed legislation might inadvertently pave the way for entrepreneurial ventures like those spearheaded by Elon Musk to launch their own stablecoins.