US SEC Concludes that Most Stablecoins Are Not Securities

The US SEC has confirmed that most stablecoins are not securities as bills seeking clear regulation for the asset class gain momentum. The US Securities and Exchange Commission has clarified that most stablecoins do not pass as securities. In an April 4 statement , the regulator disclosed this stance as bills seeking to create a framework for stablecoins in America gain momentum. Specifically, the agency’s Division of Corporate Finance mentioned that the sales of “Covered Stablecoins” do not constitute offering unregistered securities under the Securities Act of 1933. It described Covered Stablecoins as assets designed to maintain a one-to-one value relative to the US dollar, can be redeemed with the same valuation as the dollar, and have reserves fully backing or exceeding the redemption value of the tokens in circulation. Covered Stablecoins Exonerated as Securities Notably, the US SEC’s Friday statement marks its clearest position on the classification of a cryptocurrency yet. With this, the SEC has clearly mentioned what it classifies as Covered Stablecoins, inferring that parties involved in minting and redeeming this asset class do not need to register with the agency. Nonetheless, the regulator's description of Covered Stablecoins does not include algorithmic stablecoins, which describes dollar-pegged assets not backed by traditional collateral but relying on smart contracts to maintain their peg. The SEC noted that it would provide further regulatory clarity on this category of stablecoins. SEC Maintains Reservation on Interest Payment While the clarity appeased the crypto enthusiasts and even drew comments from David Sacks, the crypto and AI czar, a clause remains. The top regulator maintained that stablecoins should not be yield-bearing for holders. Per the statement, stablecoins have their use in commercial transactions, and users can adopt them as a store of value. As a result, the SEC overruled the concept that users can purchase Covered Stablecoins for investment purposes. Remarkably, this comes despite Coinbase CEO Brian Armstrong’s March 31 X article urging Congress to allow yield-sharing between stablecoin issuers and holders. He insisted that legislation should accord issuers the same rights as banks to disseminate profits to customers, arguing it was consistent with a free market approach. https://twitter.com/brian_armstrong/status/1906723887112401179 Nonetheless, the stablecoin clarity comes on the heels of recent breakthroughs in the asset’s legislation in the United States. For context, the US House Committee passed the STABLE Act this week, while the US Senate Banking Committee approved the GENIUS Act in mid-March.