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Caroline Crenshaw, a member of the U.S. Securities and Exchange Commission (SEC), recently stated that the regulator has not fully assessed the risks posed by crypto assets pegged to the U.S. dollar, which could potentially endanger individual investors. She pointed out that the current regulatory approach does not adequately reflect the risks associated with these assets.
Risk Assessment
Crenshaw noted that individual investors typically access such assets through brokerage firms, which limits their right to refunds. In her view, investors can only liquidate these assets via intermediaries.
Due to the lack of direct access to the reserves of the institutions issuing crypto assets, brokers determine prices and process refunds. This situation has raised potential issues and uncertainties regarding investor rights.
Regulatory Perspectives
The SEC has announced that non-yielding stable assets are excluded from regulatory coverage; however, it has yet to provide clear views on yielding, algorithmic, or other pegged types. Regulatory statements emphasized that asset reserves cannot be directly reflected to investors.
It was reported that the rights of individual investors regarding their assets are executed through brokerage firms rather than directly from the issuer, contrary to the regulatory claim.
Caroline Crenshaw: “The fact that stablecoin holders can only retrieve their assets through intermediaries weakens investor legal protections.”
Moreover, the absence of refund obligations for brokerages results in investors receiving their assets at market conditions rather than nominal value. This can expose them to various risk scenarios during crypto asset trading.
Evaluations have indicated that the SEC’s current regulation might create a lack of clarity for other types by considering only non-yielding assets. These statements underline the necessity for investors to act cautiously in their transactions.
The assessments suggest that potential updates to the regulator’s approach are crucial for investor protection. Investors are advised to closely monitor market dynamics and brokerage practices.
