SEC Clarifies Stablecoin Regulations, Boosting Crypto Adoption
2min read The U.S. Securities and Exchange Commission (SEC) has brought a significant development to the crypto world by announcing that certain stablecoins would not be classified as securities. This decision, made on April 4, 2025, has been welcomed by crypto advocates and financial institutions alike, as it clarifies the regulatory landscape and paves the way for broader adoption of dollar-pegged digital assets.
Ask Aime: What impact will the SEC's announcement on stablecoin classification have on the crypto market?
The SEC’s Division of Corporate Finance outlined that stablecoins meeting specific strict parameters would not be deemed securities under existing federal legislation. These "covered stablecoins" must maintain a 1:1 peg to the U.S. dollar, be fully redeemable, and be backed by low-risk, liquid assets such as U.S. Treasury securities or money market funds. Reserves cannot include assets like precious metals or other cryptocurrencies. These requirements are designed to ensure stability, transparency, and trust, especially as stablecoins increasingly interact with the traditional financial system.
Additionally, covered stablecoins can only be marketed for commerce, payments, and storing value, but not as investments. The SEC has confirmed that transactions involving the minting and redemption of such stablecoins do not require registration under the Securities Act. This regulatory clarity removes compliance uncertainty, empowering developers and companies building in the space to innovate. The new framework could redefine how markets serve users, with major players like Tether considering a U.S.-registered stablecoin to satisfy compliance demands. Other major players are expected to follow suit, signaling a broader institutional shift toward regulatory-friendly digital assets.
The SEC’s move comes as Congress builds momentum toward formalizing a regulatory framework around stablecoins. President Trump recently expressed hope that lawmakers would pass stablecoin legislation before the August recess, providing rare bipartisan urgency in crypto policy. Two major bills are currently pending: the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, backed by the House Financial Services Committee, and the bipartisan “Guiding and Establishing National Innovation for U.S. Stablecoins” (GENIUS) Act introduced by Senators Tim Scott and Bill Hagerty. Each proposal aims to put in place oversight of stablecoin issuers, bolster consumer protections, and combat illicit finance risks, demonstrating the increasing awareness of the economic potential of stablecoins.
In line with this trend, firms such as Circle are preparing for mainstream acceptance. Circle recently filed for an IPO, which, if approved, would be one of the most high-profile personalities to go public in the crypto space. The stablecoin market has seen significant growth, with stablecoins powering DeFi, cross-border transfers, and payments with dollar stability, crypto flexibility, and fast settlements. While Tether (USDT) and USD Coin (USDC) still top the market, newcomers and purpose-built stablecoins are emerging. Tether is recalibrating to global regulations by working on a U.S.-compliant stablecoin for stricter Western markets.
Yield-bearing stablecoins have also seen a surge, surpassing $13 billion and accounting for 6% of the market. However, these are outside the SEC’s most recent guidance. The SEC clarified its position on payment-focused stablecoins, explicitly excluding those offering interest to holders from the “covered” group. Features like earning yield can move a stablecoin into the world of securities, triggering more complicated regulation. The SEC stated that holders of covered stablecoins won’t receive earnings, though issuers may profit from reserve assets. Small technical differences, such as whether a user can earn yield, can drastically change a product’s regulatory picture.
