SEC Staff Releases Statement Regarding Stablecoins

On April 4, 2025, the SEC’s Division of Corporation Finance released a statement regarding stablecoins, stating that the offer and sale of “covered stablecoins” do not count as securities offerings. This means that individuals involved in creating these stablecoins are not required to register with the SEC. The statement outlines specific criteria for what constitutes a “covered stablecoin,” mentioning that it must be backed by a reserve fund containing high-quality assets like cash, cash equivalents, or treasury securities. Additionally, the stablecoin must be exchangeable one-to-one with a fiat currency, like the US Dollar, and must be marketed strictly for commercial use, payment transactions, money transfers, or as a store of value, rather than as an investment opportunity.

The SEC staff also emphasizes that covered stablecoins typically do not grant governance rights to holders or reflect any ownership stakes in the issuer. To support their stance, the statement performs a quick analysis of a covered stablecoin using the Howey test for investment contracts and the “family resemblance” test derived from the Reves case. The lack of previous SEC guidance on the Reves test makes this clarification noteworthy.

While the Staff’s statement offers a useful starting point, it overlooks the intricacies of various stablecoin types that could affect the security evaluation. For instance, the guidance seems to exclude algorithmic stablecoins from consideration as covered stablecoins. It is crucial to note that the Staff’s guidance does not touch upon the status of the reserve fund under the Investment Company Act of 1940, as this falls outside the Division of Corporation Finance’s jurisdiction. SEC Commissioner Crenshaw has voiced his disagreements with the Staff’s interpretation, suggesting that more discussions on stablecoins are likely as Congress debates multiple bills related to this topic.

In conclusion, the SEC’s recent statement on stablecoins clarifies that the creation and trading of covered stablecoins are not subject to securities regulations. However, this guidance only scratches the surface of the complex universe of stablecoins and their potential implications for investment analysis. As stakeholders in the cryptocurrency industry await further developments, it is evident that the conversation surrounding stablecoins is far from over.