Oversight of the industry is being shifted to agencies like the SEC and state-level bodies like NYDFS and California’s DFPI. This move attracted a lot of criticism from Senator Elizabeth Warren, who warned it weakens consumer protections. Meanwhile, controversy also surrounds the SEC’s new stablecoin guidelines, which exempt certain stablecoins from securities regulations. Commissioner Caroline Crenshaw criticized the guidance as misleading, but many people in the crypto industry still welcomed it as a step toward clarity. Additionally, others in the industry increasingly consider stablecoins as a strategic asset to boost US dollar dominance globally. Trump Administration Sidelines CFPB The Consumer Financial Protection Bureau (CFPB) is expected to play a reduced role in crypto regulation as federal and state-level agencies like the Securities and Exchange Commission (SEC), the New York Department of Financial Services (NYDFS), and California's Department of Financial Protection and Innovation (DFPI) take on more responsibility. This is according to Ethan Ostroff, a partner at Troutman Pepper Locke law firm. Ostroff explained in an interview that under the current Trump administration, regulatory dynamics are shifting. This means that the CFPB will likely scale back its involvement in crypto oversight in favor of these other authorities. Although the CFPB may see diminished influence, it will not be completely dismantled due to statutory obligations that can only be altered by Congress. Ostroff also explained that while state regulators have the authority under the Consumer Financial Protection Act (CFPA) to assume some roles typically held by the CFPB, certain responsibilities will remain with the bureau by law. This changing regulatory landscape reflects the administrative agenda under the Trump administration, which includes efforts by the Department of Government Efficiency (DOGE) to cut government spending and reduce federal debt. As part of this initiative, newly appointed CFPB head Russell Vought quickly introduced major funding cuts and scaled back the agency’s operations upon taking office in February of 2025. The scaling down of the CFPB sparked a lot of political backlash. Most of this backlash came from Senator Elizabeth Warren, who co-founded the agency in 2007. Warren criticized Elon Musk, and accused him of enabling the dismantling of the bureau. In a recent interview with Mother Jones, Warren compared Musk to a ”bank robber” and warned that the administration's actions are made to weaken consumer protection measures and centralize control over the financial system. She also believes that despite these efforts, the executive branch does not actually have the authority to fully eliminate the CFPB without Congressional approval. SEC Divides Opinions with New Stablecoin Rules SEC Commissioner Caroline Crenshaw also recently voiced strong opposition to the agency’s newly released guidelines on stablecoins, and even accused the regulator of downplaying systemic risks and misrepresenting the true nature of the USD-stablecoin market. A stablecoin is a type of cryptocurrency that is designed to maintain a stable value by being pegged to a real-world asset, usually a fiat currency like the US dollar. Stablecoins aim to combine the price stability of traditional money with the speed and flexibility of digital assets. This makes them very popular for trading, remittances, and storing value. In a statement that was issued on April 4, Crenshaw criticized the SEC’s conclusions as legally and factually flawed. She argued that the guidance paints an inaccurate and overly optimistic picture of stablecoin stability and redeemability. Part of Crenshaw’s statement (Source: SEC ) The new SEC guidelines state that stablecoins meeting specific criteria are now considered ”non-securities” and are exempt from certain transaction reporting requirements. While Crenshaw condemned this approach as misleading, many people in the crypto industry welcomed the development. Industry figures like Token Metrics founder Ian Ballina and Vemanti CEO Tan Tran described the move as a positive, albeit delayed, step toward regulatory clarity. Midnight Network’s Ian Kane said that it signaled progress for crypto businesses seeking to remain compliant. Crenshaw took particular issue with the SEC's characterization of stablecoin accessibility, and pointed out that most USD-stablecoins are not purchased directly from issuers but instead via intermediaries like crypto trading platforms. She explained that more than 90% of stablecoins in circulation are distributed this way, which makes the SEC’s claim that direct-to-consumer access is a norm highly inaccurate. She also criticized the SEC’s reassurance that stablecoin reserves matching or exceeding circulating supply guarantee stability. Crenshaw warned that claims like these ignore crucial financial indicators like issuer liabilities and risk exposure from proprietary activities. She held firm that stablecoins inherently carry risk, particularly during market turbulence, and suggested that the new guidance may give users a false sense of security. The controversy came just weeks after Tether, the largest stablecoin issuer, reportedly began working with a Big Four accounting firm to audit its reserves. Tether CEO Paolo Ardoino said that the audit process will likely be more streamlined under the pro-crypto stance of the Trump administration. Stablecoins Seen as Key to US Dollar Dominance On the other hand, stablecoins are stepping up as a key strategic asset for maintaining the United States dollar’s dominance in global financial markets, according to Bryan Pellegrino, the CEO and founder of LayerZero Labs. In a recent interview , Pellegrino described stablecoins as the most powerful tool that is currently available to extend the reach of the US dollar, especially in countries plagued by inflation like Argentina and Venezuela. He referred to stablecoins as a “Trojan Horse” or “vampire attack” on weaker fiat currencies, and argued that their cross-border accessibility naturally drives global demand for the US dollar. LayerZero Labs, which developed the LayerZero interoperability protocol, was recently selected by the state of Wyoming to facilitate the distribution of its Wyoming stablecoin. Pellegrino said that he expects increasing support for stablecoins at both the federal and state levels, as they enhance the dollar’s position in foreign exchange markets and fortify its role as the world’s reserve currency. As an example of growing demand, Pellegrino pointed to Tether’s ascent as one of the largest buyers of US Treasury bills. It even surpassed countries like Canada, Germany, and Saudi Arabia. Tether became the seventh-largest holder of US Treasuries, which certainly proves the big role stablecoin issuers now play in financing US debt. The strategic value of stablecoins was also a major topic of conversation at the White House Crypto Summit on March 7. Here, US Treasury Secretary Scott Bessent stated that leveraging stablecoins to preserve and expand US dollar hegemony will be a top priority for the Trump administration in 2025. (Source: Chainalysis ) Data from a 2023 Chainalysis report revealed that more than 50% of digital asset value transferred to Latin American countries, including Argentina, Brazil, Colombia, Mexico, and Venezuela, was denominated in stablecoins. Their low fees, relative stability, and fast settlement times make stablecoins especially attractive for remittances and savings in nations that are struggling with inflation and capital controls.
