Stablecoins Get SEC Clarity

Summary

The SEC clarified that certain dollar-backed stablecoins do not qualify as securities. This provides regulatory certainty for issuers of these specific stablecoins, exempting them from SEC registration requirements. However, this clarification doesn’t apply to all stablecoins, leaving some regulatory uncertainty for other types.

Investor Identification, Introduction, and negotiation.

** Main Story**

Okay, so the SEC dropped a bit of a bomb, or maybe a really helpful clarification, depending on how you look at it, on April 4, 2025. Basically, the Division of Corporation Finance issued a statement saying some U.S. dollar-backed stablecoins – they’re calling them ‘Covered Stablecoins’ – aren’t securities under federal law. Which is, you know, pretty huge.

Think about it: if your stablecoin fits the bill, you’re off the hook for all the registration stuff that comes with being a security. But here’s the catch: it’s only for a very specific kind of stablecoin. The SEC’s still watching everything else like a hawk.

Let’s dive into what exactly makes a stablecoin “Covered” shall we?

The Nitty-Gritty: What Qualifies?

So, what exactly are the rules? Well, the SEC statement lays out some very specific requirements for a stablecoin to be considered a “Covered Stablecoin”:

• 1:1 USD Backing is King: This is non-negotiable. Every single stablecoin has to be backed, dollar for dollar, by U.S. dollars or rock-solid, super liquid assets – think U.S. Treasury securities, the kind of thing you’d find in a mattress made of money, or cash equivalents. We’re talking about reserves that always match or exceed the value of the coins out in the wild. I remember back in 2023, there was a fair bit of controversy surrounding Tether, and their backing, or perceived lack of. It’s good to see the SEC learn from previous events.
• Redeemable on Demand, At Par. Period: Holders have to be able to cash out those stablecoins for real dollars, anytime, and at a fixed 1:1 rate. No funny business. Issuers should be ready to mint or burn as many of these things as needed to keep that rate stable. It’s got to be there or else what’s the point?
• No Perks. Just Payments: This is not an investment vehicle. No interest, no yield, no governance rights, nothing like that. These stablecoins are for paying bills, sending money, storing value – plain and simple. I mean, you wouldn’t expect to get dividends from your dollar bills right?
• Market It Right: The messaging around these stablecoins has to be all about commerce: their stability, reliability, and ease of use for payments and storage. No promises of riches or investment gains. This is how it’s different from a security.

So What Does This All Mean?

For companies playing in the stablecoin space, this is a win. Finally, some clearer ground rules for those “Covered Stablecoins.” Less guessing, more doing. That said, the SEC is still very much keeping an eye on everything else. Algorithmic stablecoins, yield-bearing ones, stablecoins pegged to who-knows-what… they’re all still under the microscope. And you just know they’re working hard to keep an eye on it.

Hold on, Not Everyone’s Happy…

Now, here’s where it gets interesting. Commissioner Caroline A. Crenshaw actually dissented from the Division’s statement. She argued that it doesn’t really reflect how the USD-stablecoin market works and lowballs the risks involved. I mean, are there any new regulations where someone doesn’t dissent? In this case, her point is that a lot of stablecoins end up in the hands of regular folks through intermediaries, not directly from the people who issue them. And those intermediaries? They’re not always obligated to redeem those stablecoins at par. So, if things go south, retail investors could be left holding the bag.

Good point Commissioner, I wouldn’t want to be left holding the bag.

Anyway, it just goes to show that this whole stablecoin regulation thing is far from settled. There’s still stuff like the Clarity for Payment Stablecoins Act of 2023 floating around in Congress. Even with the SEC’s statement, we all need to stay on our toes and keep an eye on how the legal landscape evolves. After all, wouldn’t you agree, surprises aren’t always welcome, especially when your finances are involved!