- A guide was released by the SEC’s Division of Corporation Finance to clarify regulations surrounding stablecoin issuance.
- The Division concluded that stablecoins do not qualify as securities offerings.
- This clarification comes amid ongoing efforts in both the House and Senate to establish comprehensive regulations for stablecoins.
The Division of Corporation Finance at the SEC published a guide on stablecoins recently, making it clear that the issuance of stablecoins backed by the US Dollar does not equate to the sale or offering of securities.
Insights on Stablecoin Issuance from SEC
The SEC’s Division of Corporation Finance has provided a guide that outlines the regulatory framework for cryptocurrency stablecoins. This guide zeroes in on “Covered Stablecoins,” which are defined as those maintaining a one-to-one parity with the US Dollar and backed by low-risk, liquid assets that are equal to or surpass their circulating value.
The Division emphasized that the offering and sale of these stablecoins do not fall under securities regulations, meaning that entities involved in the minting and redemption processes are not obligated to register their transactions with the SEC.
This guide is part of the ongoing legislative efforts to clarify stablecoin regulations, as members of the House and Senate promote the STABLE Act and the GENIUS Act—two initiatives aimed at providing regulatory frameworks for stablecoin transactions in the United States.
Furthermore, the Division pointed out that stablecoins are designed for payment purposes rather than as investment vehicles. This perspective addresses a significant debate within the cryptocurrency community, with discussions focusing on whether the STABLE Act should allow issuers to distribute stablecoin yields to holders.
The guide made it clear that proceeds from the issuance of stablecoins are to be utilized solely for building reserves, rather than for generating profit, suggesting that buyers of stablecoins should not expect profit-driven motivations.
The Division clarified its analysis through the Reeves standard, based on the US Supreme Court case Reves v. Ernst & Young (1990), which the SEC references to determine if specific financial instruments, such as notes, are classified as securities under the Securities Exchange Act of 1934.
“The Division believes that Covered Stablecoins do not meet the criteria for securities under the Reves framework,” the guide stated.
In March, President Trump mentioned his intention to sign stablecoin legislation by August, underscoring his expectation that lawmakers would accelerate the process.