TLDR
- VC Jeremy Kranz says stablecoins allow surveillance and freezing like CBDCs.
- Stablecoins topped $300B market cap in October per DeFiLlama data.
- GENIUS stablecoin bill raised concerns over backdoor CBDC regulation.
- Algorithmic stablecoins risk de-pegging in volatile crypto conditions.
Privately-issued stablecoins are under new scrutiny after a venture capital executive said they carry risks similar to central bank digital currencies (CBDCs). Jeremy Kranz, founder and managing partner of Sentinel Global, described these digital assets as “central business digital currencies,” warning they offer the same levels of surveillance, control, and vulnerability, while also adding private sector risks. His comments come as stablecoins top $300 billion in market capitalization.
Stablecoins and the Risk of Centralized Control
Jeremy Kranz said that stablecoins, although issued by private firms, are often no different from government-issued CBDCs when it comes to user control. He noted that large financial institutions can freeze or block access to stablecoin funds under regulations like the Patriot Act.
“If JP Morgan issued a dollar stablecoin and controlled it through the Patriot Act… they can freeze your money and unbank you,” Kranz said. He emphasized that the same backdoors, surveillance tools, and programmable features exist in these digital assets, whether controlled by a government or a corporation.
Kranz said this level of control poses real challenges to financial freedom. While stablecoins are marketed as decentralized or user-first, the reality often includes centralized authority over assets, similar to traditional banks or government institutions.
Redemption Pressures and Risk of “Bank Runs”
Stablecoin issuers that use overcollateralization—holding cash and short-term U.S. government securities—can face pressure when too many users redeem tokens at once. Kranz warned that such scenarios can resemble a “bank run,” where liquidity may dry up fast.
Stablecoins like USDC and others aim to maintain a 1:1 dollar peg. However, if redemption volumes spike beyond available collateral, users may face delays or losses. “They are vulnerable if too many holders try to redeem at the same time,” Kranz said.
Algorithmic and synthetic stablecoins carry different risks. These tokens maintain their peg through code or complex market strategies. However, they are exposed to de-pegging events caused by market volatility, technical issues, or flash crashes in crypto markets.
Stablecoin Bill Raises Regulatory Concerns
Interest in stablecoins surged after the passage of the GENIUS stablecoin bill in the United States. The bill aims to regulate privately-issued stablecoins but has received criticism from several lawmakers. Some say it creates a legal path for a digital dollar under private control.
U.S. Representative Marjorie Taylor Greene called the bill a “CBDC Trojan Horse.” In a July post on X, she said, “This bill regulates stablecoins and provides for the backdoor central bank digital currency.” She warned that it could lead to a cashless society where money becomes programmable and subject to control.
The bill has intensified debate around digital currency control and privacy. Lawmakers and industry experts remain divided on whether the bill protects users or increases centralized oversight.
Rapid Innovation Brings Both Opportunity and Risk
The total stablecoin market cap surpassed $300 billion in October, according to data from DeFiLlama. Kranz said the pace of change in crypto and tokenization is extremely fast and unpredictable. He compared it to “10 black swan events” happening all at once.
He warned that while the technology could help create new financial tools, it can also be misused. “Technology is neutral,” Kranz said, “but outcomes depend on who controls it and how it’s used.”
Investors, he said, must read the fine print and understand the risks before holding or using stablecoins. He added that stablecoins are not immune to failure, market volatility, or regulatory intervention, regardless of whether they are centralized or algorithmic.
