The U.S. Securities and Exchange Commission (SEC) has provided long-awaited clarity on the regulatory status of certain stablecoins. In a recent statement issued by its Division of Corporation Finance, the SEC declared that so-called “Covered Stablecoins” do not fall under its jurisdiction as securities, marking a significant development in the evolving regulatory landscape for digital assets.
What Are “Covered Stablecoins”?
According to the SEC, “Covered Stablecoins” are defined as stablecoins pegged to the U.S. dollar on a 1:1 basis, which are also redeemable for U.S. dollars at the same rate. These stablecoins are backed by low-risk, highly liquid reserve assets, with the total value of reserves equal to or exceeding the total value of tokens in circulation.
Importantly, the SEC’s definition specifically excludes algorithmic stablecoins, yield-generating stablecoins, or any stablecoins pegged to non-USD assets.
Not Investment Contracts, Says SEC
In its statement, the SEC emphasized that the offer and sale of these Covered Stablecoins do not constitute an “investment contract” under Section 2(a)(1) of the Securities Act of 1933. As such, transactions involving the minting and redemption of these tokens do not require registration with the Commission.
“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,” the SEC stated.
The clarification is part of the Commission’s broader effort to offer regulatory transparency amid growing adoption of digital assets and emerging fintech solutions.
Implications for Stablecoin Issuers and Investors
The SEC’s commentary highlights that Covered Stablecoin issuers use proceeds strictly to back reserves and that buyers do not expect any return or speculative gain. Because these assets are not designed to appreciate in value or provide yield, they do not meet the typical characteristics of investment products regulated under securities law.
This guidance is particularly relevant for issuers of the market’s two largest USD-pegged stablecoins: Tether (USDT) and USDC, which collectively dominate the stablecoin market.
With the SEC now officially stating it will not treat Covered Stablecoins as securities, issuers may experience greater operational certainty. This decision could also encourage the broader adoption of stablecoins for payments and remittances without the added burden of securities compliance.
Looking Ahead
The SEC’s guidance may serve as a model for future regulation, distinguishing low-risk stablecoins from more complex and potentially speculative crypto instruments. While questions remain for other types of digital assets, this clarification marks a step toward regulatory certainty in an industry long fraught with ambiguity.
As discussions continue across various agencies and with proposed federal legislation on the horizon, stablecoin regulation remains a key focal point in shaping the future of digital finance in the United States.
