Stablecoins supported by cash or equivalent reserves and payable for US dollars on one on one are not effects according to federal legislation, said the Securities and Exchange Commission (SEC) on April 4, which offers one of the clearest positions about the regulatory treatment of Crypto.
In a public statement, the SEC division of Corporation Finance outlined its legal views on what the “covered stablecoins” called a category with Fiat-supported digital tokens that were designed to maintain price stability through fully reserved dollar possession.
According to the division, the supply and sale of stablecoins do not include securities transactions and therefore do not require registration under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The relocation is likely to provide legal clarity for Stablecoin -Emitents, Fintech companies and crypto payment providers who have long had surgery in regulatory uncertainty.
Used for payments, no profit
According to the SEC, covered stablecoins were only designed and marketed as tools for payments, money transfer and value storage.
They do not provide interest, profit, administrative rights or property claims and are usually described as “digital dollars” instead of investment products.
The SEC emphasized that these tokens are not promoted as profit -generating instruments, an important distinction between federal securities legislation. The conclusion of the regulator was based on two milestone legal standards: the Reves v. Ernst & Young Test and the Howey test.
Under Reves, the Division found that covered stablecoins are more like instruments used for routine commercial transactions instead of speculative banknotes or debt. The office pointed to the motivation of the non-investment of the buyer and the lack of trade for profit as important reasons why the tokens fall outside the definition of the effects.
The SEC also applied the Howey test, which investigates whether a scheme entails money to invest money in a common company with an expectation of profit from the efforts of others. The agency noted that covered holders of Stablecoin do not invest for returns and that the economic reality that is of a consumer transaction is not an investment contract.
Covered stablecoins
According to the SEC, covered stablecoins must be able to be exchanged at any time and in unlimited quantities for USD for USD and in unlimited quantities. In addition, Empenters must maintain a fully supported reserve consisting of cash or liquid, low risk assets such as American treasury accounts.
These reserves must be separated, not used for the business activities of the issuer and protected against claims from third parties. In some cases, EXPENTEN must also publish proof-of-reserve certificates to verify solvency and transparency.
Although covered stablecoins can act in secondary markets, their price is usually stabilized by arbitration. If the market price rises above the PEG, designated parties can be new tokens mint and sell them for profit, increase the offer and lower the price.
In the meantime, if the price falls under the PEG, they can buy tokens with a discount and inform them for full value, the offer and raise the price.
There are still questions about proceeds
The SEC emphasized that holders of covered stablecoins receive no form of yield or shares in the income generated from reserve activa. While issuant can earn interest on the in -reserve assets, that income is retained by the issuer and not divided among token holders.
The committee emphasized that the absence of yield or financial benefit removes an important element from the Howey test, namely the expectation of profit derived from the efforts of others.
By clarifying that covered stablecoins are not being marketed as investments and do not offer upward participation, the sec pulled a line between Fiat -supported tokens used for use and marketed with return -generating functions.
The agency noted that tokens promises returns, profit sharing or exposure to the financial performance of an issue can still be subjected to securities laws.
The explanation does not extend to algorithmic or non -secondary stablecoins, which remain subject to further legal and policy consideration. Nevertheless, the announcement marks an important milestone when delimulating the regulation boundaries of equivalents of digital dollars.
