When Stablecoins Get Too Cozy with the SEC

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In a truly spectacular twist of regulatory gymnastics, the U.S. Securities and Exchange Commission (SEC) has made it abundantly clear that it has absolutely, positively, and categorically decided that “Covered Stablecoins” are not under its jurisdiction. đŸŽ‰đŸ’Œ This announcement, akin to a cat nonchalantly ignoring a laser pointer, comes from the Division of Corporation Finance, as part of an effort to provide clarity—or at least a semblance of it—in the baffling world of crypto assets.

According to our friends at the SEC, “Covered Stablecoins” are the socially acceptable kind of stablecoins that maintain a 1:1 value relative to the U.S. dollar. You know, the kind that won’t get you kicked out of polite digital society. These splendid little assets are redeemable for USD on a 1:1 basis, as if they were an extravagant yet entirely unnecessary coupon for your next trip to the cosmic grocery store.

These dollar-pegged stablecoins come with a promise of low-risk and readily liquid assets, because who doesn’t want their assets to be as liquid as a particularly enthusiastic water balloon fight? 💧 The SEC assures us that the assets backing these delightful tokens have a value that not only meets but exceeds the redemption value of all coins in circulation. Because why not overachieve, right?

However, it’s critical to note that the SEC’s statement has decided to play favourites, excluding dashing algorithmic stablecoins and those enigmatic yield-bearing varieties. It appears those not keen on the U.S. dollar shall not pass! đŸš«

Among the titans of the dollar-pegged realm are Tether (USDT) and USDC (not to be confused with a trendy new snack). With this public announcement, the SEC has officially declared that the sale or offer of these so-called “Covered Stablecoins” does not count as an investment contract. It’s a bit like saying that driving a car doesn’t involve steering—true, but do you really want to navigate without that particular insight?

“It is the Division’s view that the offer and sale of Covered Stablecoins, in the manner and under the circumstances described in this statement, do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933,” the division mused in a statement that might as well have been written while sipping tea on a cloud.

Now that the division has thrown up its hands and proclaimed that such stablecoins are outside of its watchful gaze, the official aim of the statement appears to be clarifying the important implications for would-be issuers. One might say it’s like trying to explain the rules of a particularly complex board game to someone who insists on using Monopoly money.

The main points of contention were that issuers should use sale proceeds wisely to fund the reserves of these heavenly stablecoins. Meanwhile, the buyers can rest easy, devoid of any expectations of returns—like showing up at a party and realizing it’s all organic fare. đŸ„— Let’s face it: these Covered Stablecoins aren’t meant for speculative trading nor fancy investment shenanigans.

“Accordingly, persons involved in the process of ‘minting’ (which sounds much more magical than it actually is) and redeeming Covered Stablecoins do not need to register those transactions with the Commission under the Securities Act or fall within one of its many bewildering exemptions from registration,” the agency clarified, possibly while shaking its head at the complexities of their own regulations.

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2025-04-04 23:25