The U.S. Securities and Exchange Commission (SEC) has introduced new guidance that could have a significant impact on the stablecoin market. The SEC stated that certain stablecoins, now referred to as “covered stablecoins,” may not be treated as securities as long as they meet specific conditions.
Tether, one of the largest stablecoin issuers, is reportedly considering changing its strategy to align with the SEC’s new framework.
To qualify as a covered stablecoin, the token must meet several requirements. It must be fully backed by the U.S. dollar on a 1:1 basis, supported by low-risk and highly liquid assets, and redeemable at full value at any time. These stablecoins cannot offer interest, promise profits, provide voting rights, or represent ownership. They are strictly meant for payments, transfers, and storing value.
The SEC’s clarification that these stablecoins are not securities under U.S. law is unusual, as the SEC typically takes a more cautious or enforcement-first approach to crypto.
Experts have had mixed reactions to the guidance. David Sacks, a White House crypto advisor, welcomed the update, stating that it offers much-needed clarity and reduces regulatory hurdles. However, SEC Commissioner Caroline Crenshaw disagreed, arguing that the risks involved in stablecoins are being downplayed.
While the new rules may benefit stablecoins like USDC, they pose challenges for Tether’s USDT. The SEC does not allow stablecoins to be backed by assets like cryptocurrency or gold, which are included in USDT’s reserves. Tether is reportedly exploring the idea of launching a new stablecoin that fully complies with U.S. rules and is backed only by cash and U.S. Treasuries.
Despite potential regulatory pressure, Tether is planning to launch a separate U.S.-compliant stablecoin. The company anticipates that USDT will remain focused on emerging markets, while the new stablecoin will be designed specifically for the U.S. market and built to comply with American regulations.
Stablecoins continue to experience strong growth, even in a challenging first quarter for the wider crypto market. The stablecoin market added over $30 billion in Q1 alone, indicating high demand despite market uncertainty.
The SEC’s clear guidance on stablecoins is significant for the crypto industry.
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