TheCorporateCounsel.net

On Friday, the Corp Fin Staff published a statement to address the characteristics of stablecoins that would cause them to be – or not be – a “security.” Here’s the bottom line:

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 (the “Exchange Act”).[5] 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.

The statement is a true delight for anyone who considers themselves a “securities law nerd” – because it explains how the Staff applies the seminal cases of Reves v. Ernst & Young and SEC v. W.J. Howey Co. to stablecoins. The Staff first discusses characteristics that would weigh against a stablecoin being a “security”:

– Designed to maintain a stable value relative to the United States Dollar, or “USD,” on a one-for-one basis, at any time and in unlimited quantities

– Can be redeemed for USD on a one-for-one basis (i.e., one stablecoin to one USD); and

– Backed by assets held in a reserve that are considered low-risk and readily liquid with a USD-value that meets or exceeds the redemption value of the stablecoins in circulation.

Additionally, the statement identifies marketing practices that would indicate the stablecoin isn’t being sold as a “security”:

– Marketed solely for use in commerce;

– Does not entitle a Covered Stablecoin holder to the right to receive any interest, profit, or other returns;

– Does not reflect any investment or other ownership interest in the Covered Stablecoin issuer or any other third party;

– Does not afford a Covered Stablecoin holder any governance rights with respect to the Covered Stablecoin issuer or the Covered Stablecoin; and/or

– Does not provide a Covered Stablecoin holder with any financial benefit or loss based on the Covered Stablecoin issuer or any third party’s financial performance.

The statement is also a delight for stablecoin issuers – but I’m guessing they’d be even happier with an actual law. The House Financial Services Committee recently advanced the Stablecoin Transparency and
Accountability for a Better Ledger Economy (“STABLE”) Act of 2025, right as the crypto crowd is abuzz about Circle’s possible IPO.

– Liz Dunshee