SEC Staff Delivers Highly Anticipated Guidance on Stablecoins

On April 4, 2025, the staff of the SEC’s Division of Corporation Finance issued significant guidance that the crypto industry has long been fighting for, stating that certain stablecoins—dubbed “Covered Stablecoins”—are not securities under federal securities laws. The guidance was unusually brief, direct and unqualified compared to prior staff statements:

"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 ... 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." (emphasis added)

Along with recent SEC guidance removing memecoins and proof of work mining from securities regulation, this is a major win for the crypto industry as it seeks long-awaited clarity from regulators.

By referencing both the Securities Act of 1933 and the Securities Exchange Act of 1934, the staff seems to be covering both the initial minting and sale of stablecoins, which, if securities, would be covered by the Securities Act (either registration or an exemption thereto such as private placement/Regulation D), as well as the brokering and reselling of stablecoins. The latter functions are generally governed by the Securities Exchange Act of 1934, which, among other things, governs the registration and conduct of broker-dealers and securities exchanges. The guidance stops short of giving brokers complete carte blanche, however. But when combined with the recent withdrawals of prominent broker-dealer registration cases, the intent to greenlight the blockchain and crypto industry (absent at least the SEC’s watchful eye) is clear.

Key Points:

• Stablecoins Not Securities: covered stablecoins specifically refer to digital assets designed as mediums of exchange, payment mechanisms, or stable value stores. To qualify, stablecoins must maintain a 1:1 peg with the U.S. dollar (USD) and be fully collateralized by high-quality, low-risk, readily liquid assets—such as USD cash deposits, cash equivalents and U.S. Treasury securities.
• Unlimited Redemption: Issuers must offer unlimited, immediate redemption on a one-for-one USD basis. Note that, as stated in Commissioner Caroline A. Crenshaw’s dissent, stablecoin redemption for retail users is generally handled by exchanges or other intermediaries. Most centralized stablecoin issuers do not allow direct retail redemption without satisfying separate conditions, minimally Know Your Customer and minimum redemption thresholds. Importantly, Crenshaw notes that, contrary to the underlying assumption behind the staff’s release, holders do not have a right to access the reserves by virtue of their stablecoin holdings.
• Decentralization Matters Too: The SEC’s analysis under the Howey and Reves tests can be extended to decentralized stablecoins, such that where decentralized stablecoins aren’t marketed as investments and otherwise meet the covered stablecoin criteria, they should also fall outside the remit of the SEC and U.S. securities laws.
• Importance: Many in the industry praised today’s guidance as a huge regulatory win, underscoring its positive impact on payment stablecoins and one that provides a potential turning point for institutional entry into crypto.
• Notable Exclusions: Importantly, algorithmic and yield-bearing stablecoins remain outside this guidance.

Why It Matters:

• Provides the long sought-after “regulatory clarity” and removes roadblocks that precluded mainstream adoption across institutional and retail users, potentially accelerating mainstream adoption.
• Distinguishes clearly between payment-focused stablecoins and more speculative crypto-assets.
• The SEC’s guidance is largely consistent with ongoing bipartisan Congressional efforts around stablecoins (e.g., the STABLE Act and GENIUS Act) which reinforces momentum to build a comprehensive and pro-innovation regulatory framework.
• The most prominent stablecoins that meet the covered stablecoin definition established by the staff is Tether and the USDC coin. These coins are exchangeable 1:1 for USD; however, the U.S. Treasury, Federal Reserve Board and FDIC do not directly back stablecoins. In fact, until recently Tether and the SEC were engaged in litigation of this matter, and Circle Internet Group, Inc. has recently filed for its IPO. PayPal and World Liberty Financial (the cryptocurrency company backed by the President’s family) have also promised to launch stablecoins.

What's Next:

• Stablecoin issuers, exchanges, industry participants and crypto-curious traditional finance institutions can move confidently forward around covered stablecoins and lean into this area of the digital asset industry.
• Ongoing efforts to figure out how yield-bearing stablecoins can find a road to compliance under U.S. securities laws. These investments present greater interpretative challenges due to issuer structure similarities to money market funds and face certificate companies, both subject to the Investment Company Act of 1940. The inference from the release could be that yield-bearing stablecoins are securities, or at least could be securities, since they are investment contracts that rely on the efforts of the issuer to produce the expected yield, or at least to keep enough supply circulating to enable a fluid market.

Bottom Line:

The stablecoin guidance represents yet another landmark crypto regulatory development, supercharging the legal landscape for stablecoins and establishing a regulatory foundation for the crypto and broader financial industries. Investors should do their homework to ensure their assets are entrusted to properly covered stablecoin issuers and know the difference between covered and uncovered when evaluating risk.

.

. “A “meme coin” is a type of crypto asset[2] inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading. Although individual meme coins may have unique features, meme coins typically share certain characteristics. Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles. Meme coins also typically have limited or no use or functionality.”

“It is the Division’s view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws. As such, persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933 or fall within one of the Securities Act’s exemptions from registration. Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws.” (emphasis added)

. “Proof-of-work (“PoW”) is a consensus mechanism that incentivizes network transaction validation by rewarding network participants, called “miners,” who operate nodes adding computational resources to the network. PoW involves validating transactions on a network and adding them in blocks to the distributed ledger … It is the Division’s view that “Mining Activities” (defined in this statement) in connection with Protocol Mining, 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”) and Section 3(a)(10) of the Securities Exchange Act of 1934. Accordingly, it is the Division’s view that participants in Mining Activities do not need to register transactions with the Commission under the Securities Act or fall within one of the Securities Act’s exemptions from registration in connection with these Mining Activities.” (emphasis added)

.

. “The Division of Corporation Finance issued another installment today in its ongoing statement series dedicated to jurisdictional carve-outs for crypto. This one opines that certain so-called “stablecoins” are not securities. What’s remarkable about this statement is not so much its ultimate conclusion, but the analysis staff relies on to get there. The statement’s legal and factual errors paint a distorted picture of the USD-stablecoin market that drastically understates its risks.” (emphasis added)

We believe it is significant that a sitting commissioner added a dissent to a staff interpretation. Dissents are often attached to Commission votes, but rarely to staff interpretations, legal bulletins or no action letters. This signifies that the staff is really speaking on behalf of the Acting Chairman Mark Uyeda and perhaps even incoming Chairman Paul Atkins (whose confirmation is pending in the Senate). One can also question how independent the SEC will be in this administration, which generally acts by consensus and avoids overt political bias.

“But generally speaking, as described above, issuers have no “redemption obligations” to retail coin holders. These holders have no interest in or right to access the issuer’s reserve. If they redeem coins through an intermediary, they are paid by the intermediary, not from the issuer’s reserve. The intermediary is not obligated to redeem a coin for $1 and will instead pay the holder the market price. Retail coin holders therefore do not, as staff claims, have a “right[]” to “redemption for USD on a one-for-one basis. (Crenshaw Dissent)

The two prominent U.S. Supreme Court precedents on the definition of a security. Securities and Exchange Commission v. W. J. Howey Co., 328 U.S. 293 (1946), was a case in which the Supreme Court held that the offer of a land sales and service contract was an “investment contract” within the meaning of the Securities Act of 1933. Reves v. Ernst & Young, 494 U.S. 56 (1990) refined Howey by excluding notes and other debt instruments: In order to raise money to support its general business operations, the Farmer's Cooperative of Arkansas and Oklahoma sold uncollateralized and uninsured promissory notes payable on demand by the holder. Offered to both Co-Op members and nonmembers and marketed as an “Investment Program,” the notes paid a variable interest rate higher than that of local financial institutions. After the Co-Op filed for bankruptcy, petitioners, holders of the notes, filed suit in the District Court against the Co-Op's auditor, respondent's predecessor, alleging, inter alia, that it had violated the antifraud provisions of the Securities Exchange Act of 1934 -- which regulates certain specified instruments, including “any note[s]” -- and Arkansas' securities laws by intentionally failing to follow generally accepted accounting principles that would have made the Co-Op's insolvency apparent to potential note purchasers. Petitioners prevailed at trial, but the Court of Appeals reversed. Applying the test created in SEC v. W.J. Howey Co., 328 U. S. 293, to determine whether an instrument is an “investment contract” to the determination whether the Co-Op's instruments were “notes,” the court held that the notes were not securities under the 1934 Act or Arkansas law, and that the statutes' antifraud provisions therefore did not apply. .

and .

.

.