The U.S. SEC has clarified that most stablecoins are not securities, outlining the corners of the crypto sector for which the agency does not have a legal interest.
The U.S. Securities and Exchange Commission (SEC) Staff Clarifies That Some Crypto Stablecoins Aren’t Securities.
The U.S. Securities and Exchange Commission (SEC) has issued a statement clarifying that most stablecoins are not securities. The statement, which was released by the agency’s Division of Corporation Finance, outlines the corners of the crypto sector for which the SEC does not have a legal interest.
Stablecoins are cryptocurrencies pegged to a stable asset, such as the US dollar.
They aim to provide price stability and reduce volatility.
Regulatory bodies worldwide are still figuring out how to govern these digital assets.
The US Securities and Exchange Commission (SEC) has taken a closer look at stablecoin issuers, requiring them to register with the agency.
Other countries like China have banned stablecoins altogether.
As the use of stablecoins grows, so does the need for clear regulations to maintain financial stability.
What is a Stablecoin?
A stablecoin is a digital asset designed to be pegged to the value of a traditional currency or commodity. In this case, the SEC has stated that most stablecoins are marketed solely for use in commerce, as a means of making payments, transmitting money, and/or storing value, and not as investments.
The SEC’s Definition
According to the statement, 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 has also clarified that such stablecoins are subject to a relatively narrow definition, which may not include Tether‘s offering.
Tether Excluded?
The statement notes that Tether‘s token is potentially excluded from the new definition due to its reserves, which do not meet certain criteria. Specifically, the footnotes say that acceptable reserves ‘do not include precious metals or other crypto assets,’ but Tether‘s terms of service suggest minimum amounts or delays may be imposed.
Tether is a type of cryptocurrency that is pegged to the value of another currency, typically the US dollar.
It was created in 2014 by Brock Pierce and William Mougayar as a stablecoin to reduce volatility in cryptocurrency markets.
Tether's value is supposed to be equivalent to the amount of fiat currency held in reserve, which is usually kept at a bank or other financial institution.
However, there have been controversies surrounding Tether's reserves and whether they truly back up the issued tokens.
Reaction from Industry Leaders
The news has been welcomed by industry leaders, including Circle President Heath Tarbert, who posted a social-media comment stating that the SEC‘s statement is clear: stablecoins backed one-for-one with high-quality liquid assets are not securities. However, some have expressed concerns that ‘Elon Musk may leverage his status as a tech giant to follow suit.’
Congressional Action
Meanwhile, Congress has been moving forward on establishing a new set of U.S. standards for the issuance of stablecoins. This week, the House Financial Services Committee advanced a stablecoin bill toward a vote of the overall House of Representatives. The Senate is building toward consideration of a similar bill that’s also been approved by committee there.
SEC Commissioner Hester Peirce
SEC Commissioner Hester Peirce has said she feels the early, nonbinding moves to reverse crypto resistance at the SEC are important and should be done as rapidly as possible, even if they’re not yet official policy. She’s also expressed interest in issuing a statement on non-fungible tokens (NFTs).
Upcoming Events
The SEC is set to have its second in a series of crypto summits next week, which will focus on trading. The agency may also soon be taken over by ‘Trump’s pick for a permanent chairman if Paul Atkins is confirmed by the Senate.’
