SEC Confirms “Traditional” Stablecoins Are Not Securities

The SEC said that stablecoins backed by cash and equivalent assets such as USDT and USDC will not be considered securities.

After clarifying its securities stance on memecoins and coins using the Proof-of-Work mechanism, the US Securities and Exchange Commission (SEC) recently made a similar move on the stablecoin sector.

Specifically, in the latest announcement, the SEC representative stated that “backed” stablecoins – defined as crypto assets pegged to the US dollar, convertible 1:1 with the USD, and backed by a basket of low-risk, highly liquid assets with the US dollar – will not be classified as securities.

🚨NEW: The @SECGov Division of Corporation Finance has just put out guidance on stablecoins.

The agency has minted a new term — ‘Covered Stablecoins’ which describes stablecoins that “maintain a stable value relative to the United States Dollar, on a one-for-one basis, can be… pic.twitter.com/g3HjCc7mHa

— Eleanor Terrett (@EleanorTerrett) April 4, 2025

This is also the definition commonly used in the cryptocurrency space to refer to “traditional” stablecoins such as USDT or USDC, to distinguish them from crypto-backed stablecoins or algorithmic stablecoins.

The SEC believes that these crypto assets do not have the characteristics of securities because the seller uses the proceeds to back the stablecoin they issue, while the buyer also has no expectation of profit on the purchased asset to satisfy the Howey Test. These stablecoins are used primarily for commerce, payments, and stores of value, not for investment.

Therefore, the commission does not require companies Stablecoins must report their issuance and trading activities to the SEC.

However, the SEC’s definition also states that the reserve fund of a “backed” stablecoin should consist purely of cash and cash equivalents. Therefore, Tether’s USDT may not meet this criterion when the company’s financial statements admit to investing in gold and Bitcoin.

Tether is also in the process of developing its own stablecoin that complies with US law to operate alongside USDT. The company’s CEO, Paolo Ardoino, has affirmed that it has no intention of abandoning the US market, but will not seek to make USDT compliant.

Emphasizing that “backed” stablecoins are not securities will pave the way for other US financial giants to enter this field. To date, there have been many names such as Fidelity, World Liberty Financial, Bank of America, the states of Wyoming and Michigan, Robinhood, Revolut, State Street, ...

As reported, the SEC under the Trump administration has changed its stance on the crypto industry. After establishing a dedicated task force on cryptocurrency policy, the US Securities and Exchange Commission has dismissed a series of lawsuits against major companies in the cryptocurrency field such as Coinbase, OpenSea, Robinhood, Consensys (MetaMask), Uniswap, Kraken, Yuga Labs, Cumberland KRW, BitClout and Ripple, as well as suspended the lawsuit against Binance and TRON.

The SEC is also open to altcoin ETF applications, considering the possibility of allowing staking and saying that memecoins and Proof-of-Work coins are not securities.

The SEC is also open to accepting ETF applications for several altcoins and considering allowing staking, as well as affirming that Proof-of-Work coins and memecoins are not securities.

The US Congress is currently discussing two stablecoin management bills, GENIUS and STABLE, which would set out specific regulations for stablecoin issuance in the US.