SEC Sets Clear Guidelines for Fiat-Backed Stablecoins
The SEC has taken a clear stance on stablecoins backed by cash or cash-equivalent reserves, declaring that they do not qualify as securities under federal law.
This announcement brings significant regulatory clarity, especially for stablecoin issuers and crypto payment providers who have operated under ambiguous guidelines.
In a recent public statement, the SEC clarified that stablecoins designed to maintain a fixed value through dollar reserves are not considered securities. The reasoning is straightforward: these stablecoins are intended for payments and value storage rather than investment. They do not offer profit opportunities, governance rights, or ownership claims, which sets them apart from financial securities.
The SEC’s conclusion was drawn using the Reves v. Ernst & Young and Howey tests, which assess whether an asset is intended for investment and profit. Since stablecoins are primarily used for transactions rather than generating income, they fall outside the securities classification.
To be considered a “Covered Stablecoin,” these tokens must be redeemable at a fixed price and fully backed by liquid, low-risk assets like U.S. Treasury bills. Reserves must be kept separate from the issuer’s operations and protected from external claims. Some issuers might also need to provide proof of reserves for transparency.
While stablecoins may trade on secondary markets, their value remains stable due to arbitrage practices. When the price exceeds the peg, new tokens are issued; if it drops, tokens are repurchased and redeemed. This mechanism keeps the price aligned with the dollar.
Notably, holders of these stablecoins do not earn yields from reserve assets. Any interest generated stays with the issuer, reinforcing that these tokens are not marketed as profit-generating instruments. The SEC also noted that other types of stablecoins, such as algorithmic or unbacked versions, remain subject to further legal consideration.
Kosta has reported on cryptocurrency markets and blockchain infrastructure since 2020, bringing over six years of hands-on experience in the crypto industry built through daily tracking of markets, trends, and emerging blockchain developments. Specializing in Bitcoin on-chain analysis, institutional ETF flows, and digital asset price action, his work at Coindoo has been cited by other news agencies and consistently covers market developments with a focus on data-driven reporting across Bitcoin, Ethereum, Solana, and XRP. Over the years, Kosta has contributed to multiple crypto media outlets in different regions, authoring over 6,000 articles across the sector. His reporting spans cryptocurrency markets and the broader fintech industry, tracking not only price action but also the technological and regulatory forces shaping the ecosystem. To support his analysis, Kosta actively leverages on-chain data and metrics from leading platforms such as Santiment, Glassnode, and CryptoQuant, enabling deeper, evidence-based market insights. He believes in the power of transparency and the data that underpins the blockchain ecosystem. His academic background in Marketing Management from Denmark further complements his analytical approach, adding a strong understanding of communication strategy and content positioning to his work.
