SEC Clarifies: Dollar-Backed Stablecoins Not Securities, Boosts Crypto Sector

The U.S. Securities and Exchange Commission (SEC) has made a significant regulatory announcement, stating that "covered" stablecoins, which are fully backed by U.S. dollars and easily convertible to fiat, are not considered securities under U.S. law. This decision provides legal clarity for top-dollar-backed tokens such as USDT (Tether) and USDC (Circle), which can now operate without the need for SEC registration.

The SEC defines covered stablecoins as digital tokens that are pegged 1:1 to the U.S. dollar, backed by cash or cash-equivalent low-risk assets like U.S. Treasuries, used for payments, storing value, or transmitting funds, and redeemable on demand by the issuer. These tokens function similarly to digital dollars, and the SEC's new stance means that minting or redeeming these types of stablecoins does not require registration with the SEC.

However, the SEC did not extend this clarity to algorithmic stablecoins, which are backed by code and economic mechanisms rather than dollars. This silence suggests that algorithmic stablecoins may still face regulatory uncertainty and potentially stricter scrutiny in the future.

This regulatory development aligns with several bills currently under consideration in the U.S. Senate, including the GENIUS Stablecoin Bill and the Stable Act of 2025. These bills aim to establish a clear legal framework for stablecoins and ensure that the U.S. dollar maintains its role as the global reserve currency. Under these proposed laws, major stablecoin issuers like Tether and Circle would fall under Federal Reserve oversight, ensuring that their dollar reserves are held in regulated banks and short-term Treasuries.

The timing of this SEC clarification is notable, given that USDT is currently the world’s third-largest crypto and dominates the stablecoin market. This decision is seen as a bullish signal for the U.S. crypto sector, indicating a shift toward clearer regulations. With legal clarity, the industry can expect more innovation, increased institutional involvement, and greater consumer trust. This regulatory framework could position the U.S. to catch up in the global digital asset race.