The U.S. Securities and Exchange Commission Releases New Commentary on Stablecoins
The U.S. Securities and Exchange Commission has released new commentary on stablecoins, with the agency’s Division of Corporation Finance noting that this is part of the effort to provide further regulatory clarity. SEC said in a news release that the guidance aligns with its objective of providing clarity regarding federal securities laws as related to crypto assets. In this case, the agency has zeroed in on a type of stablecoins it now calls “Covered Stablecoins.”
According to the regulator, “Covered Stablecoins” means those stablecoins that maintain a stable value relative to the U.S. dollar, on a 1:1 basis and are redeemable for USD on a 1:1 basis. This type of USD-pegged stablecoin, per the SEC’s Division of Corporation Finance, has low-risk and readily liquid assets as reserves. Assets backing the stablecoins also have a USD-value that meets or surpasses the given token’s redemption value of all coins in circulation.
Notably, the statement excludes other types of stablecoins such as algorithmic and yield-bearing stablecoins. The division’s statement doesn’t also cover those stablecoins pegged on the value of other assets and not the United States Dollar. The two leading stablecoins pegged to the USD are Tether (USDT) and USDC (USDC).
With this description in place, the SEC says the sale or offer of the so-called “Covered Stablecoins” does not constitute an investment contract.
“It is the Division’s view that the offer and sale of Covered Stablecoins, in the manner and under the circumstances described in this statement, do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933,” the division wrote. Now that the division says such stablecoins do not fall within the SEC’s purview, the objective of its statement was to clarify important considerations and implications for issuers.
The key details in the statement are that issuers use sale proceeds to fund the covered stablecoins reserves. Meanwhile, buyers do not have any expectation of returns on the funds they hold and Covered Stablecoins do not encourage speculative trading or for investment.
“Accordingly, persons involved in the process of “minting” (or creating) and redeeming Covered Stablecoins do not need to register those transactions with the Commission under the Securities Act or fall within one of the Securities Act’s exemptions from registration,” the agency noted.