A new assessment by the U.S. Securities and Exchange Commission (SEC) offers new insights into the classification of cryptoassets, as a way to guide their regulation.
This time, the agency's Division of Corporation Finance is focusing on stablecoins. As explained in a statement published on the SEC's official website on April 4, most stablecoins are located in areas outside its jurisdiction.
In this way, the SEC now under new leadership appointed by Donald Trump is expanding its list of cryptocurrencies not considered securities. This is, so long as they meet the requirements to be classified as covered stablecoins.
Under this new term, the agency groups together stablecoins that “maintain a stable value relative to the US dollar, on a one-to-one basis.”
Consequently, “covered stablecoins” are those that have a 1:1 value with the dollar and are traded exclusively for use in commerce, as a means of making payments, transmitting money and/or storing value.
They must also be backed by assets held in a “low-risk” reserve to facilitate settlement. If these requirements are met, the issuance and transactions in these currencies do not need to be registered with the SEC.
In this regard, it should be noted that one of the footnotes in the statement states that for stablecoins not to be considered securities, their reserves “must not include precious metals or other cryptocurrencies.”
It is understood that Circle's USDC could be included among the stablecoins covered. However, such a statement calls into question the classification of USDT, the most popular stablecoin on the market.
In this regard, it's worth considering that while more than 80% of Tether's reserves include cash and short-term securities, nearly 4% are made up of precious metals. Nearly 9% is made up of other investments, including BTC.
In that sense, the SEC statement insists that all backing assets should be redeemable for dollars at any time. This contrasts with Tether's terms of service, which suggest that minimum amounts or delays may be imposed.
Circle's president, Heath Tarbert, commented on this topic:
The SEC has just drawn a clear line: stablecoins individually backed by high-quality liquid assets, like USDC, are NOT securities. This certainty doesn't extend to other digital assets just because they call themselves 'stablecoins.'
Heath Tarbert President of Circle
Based on the above, algorithmic stablecoins, yield-earning stablecoins, and stablecoins that track the value of assets other than the US dollar also do not fall under the concept of “covered stablecoins.”
Stablecoins pass the Howey test
In its brief, the SEC reiterates that to exempt stablecoins from the list of securities, they must not be used as an investment , nor must they grant their holder the right to receive any interest, profit, or other returns.
As part of its evaluation, the SEC subjected stablecoins to the so-called Howey test, a test they use to determine whether an asset is a security or not.
In his view, investors are not attracted to most stablecoins by the prospect of a return on their investment.
As mentioned above, buyers do not acquire covered stablecoins with a reasonable expectation of profits derived from third-party business or management initiatives, as these instruments are not marketed as investments, nor is their profit potential prioritized.
SEC Statement.
The SEC working group's work is initially focused on classifying cryptocurrencies to determine which ones fall under its oversight. Therefore, this new statement from the agency follows similar recent announcements regarding the classification of Bitcoin mining and memecoins.
