SEC Clarifies Stablecoin Regulations, Excludes USDT

The US Securities and Exchange Commission (SEC) has issued a definitive statement on the regulatory treatment of stablecoins, marking a significant development in the crypto market. The agency clarified that certain stablecoins, under specific conditions, do not fall under the definition of securities. These assets, labeled as “covered stablecoins,” must meet strict requirements to remain outside the regulator’s oversight. They must maintain a one-to-one peg with the US dollar, be backed by highly liquid, low-risk assets, and be redeemable on demand at full value. Importantly, these tokens cannot offer profit, interest, governance rights, or ownership stakes, and their sole function must be payment, money transfer, or value storage. The SEC explained that these assets are not investment vehicles and are typically marketed as “digital dollars.” As such, the agency does not consider their offer or sale to involve securities under federal law.

This guidance provides a clear path forward for stablecoins like USDC, which comply with the SEC’s criteria. However, it casts doubt on whether Tether’s USDT qualifies. The guidance specifically excludes reserves made up of crypto assets or precious metals, both of which are part of USDT’s current backing. According to a journalist, Tether is considering launching a new stablecoin to align with US regulations. This proposed asset would be fully backed by cash and US Treasuries, marking a major shift in strategy for the issuer as it navigates increasing scrutiny. A crypto analyst also pointed out that USDT’s reserves include Bitcoin and gold, which are explicitly disqualified by the SEC’s criteria. As a result, USDT may fall within the scope of securities law and face potential restrictions in the US.

Industry responses to the new guidelines have been mixed. A White House advisor on crypto policy welcomed the move, stating that the statement provides long-overdue clarity and could ease regulatory burdens for compliant issuers. However, an SEC Commissioner offered sharp criticism, warning that the guidance downplays risks in the stablecoin market and misrepresents key legal issues. According to the Commissioner, the statement presents an overly simplistic view of the industry, drastically understating its risks.

This development comes as stablecoins are gaining wider adoption despite market volatility. The sector increased by more than $30 billion during the first quarter of the year despite the broader market sell-off. The news highlights the evolving regulatory landscape for stablecoins and the potential impact on major players like Tether. As the market continues to grow, the clarity provided by the SEC’s guidance will be crucial for issuers navigating the complex regulatory environment.