SEC Statement on Stablecoins
The SEC's Division of Corporate Finance posted a "Statement on Stablecoins," which says, "As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets, the Division of Corporation Finance is providing its views on certain types of crypto assets commonly referred to as 'stablecoins.' Specifically, this statement addresses stablecoins that are designed to maintain a stable value relative to the United States Dollar, or 'USD,' on a one-for-one basis, can be redeemed for USD on a one-for-one basis (i.e., one stablecoin to one USD), and are backed by assets held in a reserve that are considered low-risk and readily liquid with a USD-value that meets or exceeds the redemption value of the stablecoins in circulation. As discussed below, we refer to the types of stablecoins addressed by this statement as 'Covered Stablecoins.'" They explain, "A stablecoin is a type of crypto asset designed to maintain a stable value relative to a reference asset, such as USD or another fiat currency, or a commodity like gold, or a pool or basket of assets. Stablecoins generally are designed to track the value of the reference asset on a one-for-one basis. Stablecoins may use different methods to maintain a stable value. In some cases, stablecoins maintain a stable value by being backed by assets held in a reserve. In other cases, stablecoins are designed to use mechanisms other than reserves to maintain a stable value, such as using algorithms that increase or decrease the supply of stablecoins in response to demand. The risks associated with stablecoins vary significantly depending on multiple factors, including their stability mechanisms and the maintenance of a reserve (if applicable). Stablecoin issuers generally offer and sell stablecoins at a price corresponding to that of the reference asset on a one-for-one basis. For example, if the stablecoin references USD, the issuer will offer and sell one stablecoin for one USD. Stablecoins can be issued and traded in fractions, and in such case the stablecoins maintain the one-for-one reference (i.e., 0.5 stablecoin represents $0.50 USD). The issuer generally uses the assets held in the reserve to fund stablecoin redemptions (i.e., the delivery of the stablecoin in exchange for the reference asset on a one-for-one basis)." The piece adds, "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 within the meaning of Section 2(a)(1) of the Securities Act of 1933 (the 'Securities Act') or Section 3(a)(10) of the Securities Exchange Act of 1934 (the 'Exchange Act'). Accordingly, persons involved in the process of 'minting' (or creating) and redeeming Covered Stablecoins do not need to register those transactions with the Commission under the Securities Act or fall within one of the Securities Act's exemptions from registration."
