The US Securities and Exchange Commission (SEC) has clarified that the majority of stablecoins do not qualify as securities, a statement that comes amid growing legislative efforts to establish a clear regulatory framework for the asset class in the United States.
In a statement issued on April 4, the SEC emphasized its position that most stablecoins do not fall under the purview of securities regulations, specifically under the Securities Act of 1933.
Stablecoins and the SEC’s Definition
The SEC’s Division of Corporate Finance outlined that sales of what it calls “Covered Stablecoins” do not constitute the offering of unregistered securities. Covered Stablecoins, as defined by the SEC, are assets designed to maintain a one-to-one value relative to the US dollar. These stablecoins can be redeemed at the same value as the dollar, and their reserves fully back or exceed the redemption value of the tokens in circulation.
This definition provides a sense of clarity for the cryptocurrency industry, as the SEC’s position exonerates these particular stablecoins from being classified as securities. As such, entities involved in minting and redeeming Covered Stablecoins do not need to register with the SEC as they would with traditional securities.
Excluding Algorithmic Stablecoins
While the SEC has provided a clearer stance on Covered Stablecoins, it did not include algorithmic stablecoins in its definition. Algorithmic stablecoins are those that are pegged to the US dollar but are not backed by traditional collateral. Instead, these stablecoins rely on smart contracts to maintain their peg to the dollar. The SEC clarified that this category of stablecoins requires further regulatory examination and that it would provide additional clarity in the future.
This distinction is significant, as algorithmic stablecoins have garnered increasing attention due to their reliance on innovative mechanisms rather than traditional collateral reserves. The SEC’s acknowledgment of the need for further regulatory clarification on algorithmic stablecoins signals that this category will continue to be a point of focus as lawmakers work to define the legal boundaries of the stablecoin market.
Momentum for Stablecoin Legislation
The SEC’s announcement comes at a pivotal moment as legislative efforts to create a comprehensive framework for stablecoins in the United States are gaining momentum. Several bills are currently under consideration in Congress, which aim to establish clear guidelines for stablecoins, including how they are issued, backed, and regulated.
The growing attention on stablecoin regulation reflects the increasing role that stablecoins play in the broader cryptocurrency ecosystem. As stablecoins are widely used for trading, payments, and as a store of value, regulators are seeking to ensure that these digital assets are subject to the appropriate levels of oversight while allowing innovation to continue.
Looking Ahead: Clarity and Action
The SEC’s clarification regarding Covered Stablecoins provides much-needed clarity for businesses operating in the space, especially for those involved in the issuance and redemption of stablecoins backed by traditional reserves. However, with the SEC acknowledging the complexity surrounding algorithmic stablecoins, the market can expect more regulatory scrutiny in the coming months.
As stablecoins continue to evolve and play a central role in the cryptocurrency ecosystem, the SEC’s actions will be closely watched by industry players and policymakers alike. The regulatory landscape for digital assets, and stablecoins in particular, remains in flux, but the SEC’s recent statement marks a significant step toward clearer regulation in the space.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/sec-confirms-most-stablecoins-are-not-securities/