SEC clarifies that stablecoins do not fall under securities offering

The Securities & Exchange Commission (SEC) Division of Corporation Finance released a guide on stablecoins on Friday, clarifying that the issuance of US Dollar-backed stablecoins does not constitute sales or offering of securities.

SEC sheds light on stablecoin issuance

The SEC's Division of Corporation Finance issued a guide to clarify the regulatory state of crypto stablecoins. The guide focuses on "Covered stablecoins," which are stablecoins that maintain a one-to-one value with the US Dollar and are backed by low-risk, liquid reserve assets equal to or exceeding their value in circulation.

The Division stated that the offer and sale of these stablecoins do not fall under securities laws and, as such, do not constitute securities offering. As a result, people or entities involved in the process of minting and redeeming stablecoins are not required to register their transactions with the SEC. 

The guide follows the ongoing process among lawmakers to provide regulatory clarity for stablecoins. House and Senate committee members are pushing for the issuance of the STABLE Act and the GENIUS Act, two bills focused on providing regulatory guidelines for stablecoin payments in the US.

Meanwhile, the Division noted that stablecoins are meant for payment transactions, not investment products. This counters a key area of debate among crypto community members who have argued that the STABLE Act should permit issuers to pass on stablecoin yield to holders.

The guide highlighted that issuers use the proceeds from issuing stablecoins solely to fund reserves rather than for profit — claiming that stablecoin buyers shouldn't be motivated by profit.

The Division clarified its findings using the Reeves analysis, derived from the US Supreme Court case Reves v. Ernst & Young (1990). The SEC uses it to determine whether certain financial instruments, particularly notes, qualify as securities under the Securities Exchange Act of 1934. 

"It is the Division's view that Covered Stablecoins are not securities under Reves," the Division noted in the guide.

President Donald Trump had stated in March that he hoped to sign a stablecoin legislation by August, indicating his expectation for lawmakers to expedite the process.