New SEC Guidance Clarifies Stablecoin Regulation
The U.S. Securities and Exchange Commission (SEC) clarified its stance on a specific type of stablecoins by stating that they fall outside its authority. The announcement, issued by the SEC’s Division of Corporation Finance, identifies a subset of stablecoins, referred to as “Covered Stablecoins,” and describes how such digital assets fall outside the legal definition of securities.
This move is intended to help participants and issuers of crypto assets to comply more effectively.
What Is a “Covered Stablecoin”?
In the SEC, a “Covered Stablecoin” refers to a token that remains stable in value by pegging to the U.S. dollar on a 1:1 ratio. Such coins should also be able to be exchanged for USD at the same rate and be backed by high-quality, liquid assets.
The reserves must be at least equal to or higher than the total redemption value of outstanding coins. Notably, this excludes algorithmic stablecoins, yield-generating tokens, and those pegged to assets other than the U.S. dollar.
Why They’re Not Considered Securities
The SEC announcement reiterated that Covered Stablecoins lack expectations of profit on the part of purchasers, do not facilitate speculative trading, and are collateralized solely by reserve assets. Therefore, they cannot be “investment contracts” under Section 2(a)(1) of the Securities Act of 1933.
As there is no promise of returns, and money is being invested only to back the token’s value, the SEC says that it has no authority over their sale or issuance.
Penalties for Issuers and Market
Such explanation would exempt stablecoin issuers—such as USDC and Tether (USDT) issuers—from registering their Covered Stablecoin offerings with the SEC. The directive provides long-sought clarity and could fuel additional adoption and reduce compliance friction.
While this development constrains the jurisdiction of the SEC over certain stablecoins, it does not extend to other crypto assets. The agency reiterated its commitment to offering further guidance where digital assets intersect with federal securities law.
