The past two weeks have been relatively quiet, with stablecoins being the most prominent focus on the regulatory front. Stablecoin legislation now appears likely this year, with a bill to regulate stablecoins advancing out of the key House Financial Services Committee — a step toward what would be the first crypto-specific federal legislation enacted in the United States. The SEC also issued guidance clarifying that certain “covered stablecoins” are not securities under existing law. Unresolved are several key questions — including whether regulatory authority over stablecoins will lie solely with the federal government or continue to be shared with the states and whether interest-bearing stablecoins should be treated as stablecoins at all.

These developments and a few other brief notes are discussed below.

SEC Clarifies That Certain Stablecoins Are Not Securities: April 4, 2025

Background: While Congress moves toward a legislative framework for stablecoins (discussed below), the SEC has issued limited guidance addressing how existing securities laws apply to certain types of stablecoins. The SEC’s Division of Corporation Finance’s Statement on Stablecoins provides that the offer and sale of certain “covered stablecoins” do not consist of the offer and sale of securities and issuers of the same “do not need to register . . . with the Commission under the Securities Act or fall within one of the Securities Act’s exemptions from registration.”

Analysis: Under the guidance, “covered stablecoins” are defined as stablecoins that are marketed for the purposes of making payments, are exchangeable for the reference currency on a one-for-one basis and are backed by a reserve of low-risk, liquid assets. There are at least two big takeaways from this guidance. First, interest-bearing stablecoins could turn a consumer product into an investment product under the Howey and Reves tests. Second, while not explicitly addressed, the statement implies that stablecoin issuers might not need to register as investment companies under the Investment Company Act of 1940 as long as the assets backing the stablecoin are USD and other assets that are “considered low risk and readily liquid.” This view is consistent with pending legislation that would prohibit interest payments on stablecoins to distinguish them from investment products. Notably, the guidance does not address stablecoins pegged to anything other than the U.S. dollar.

Stablecoin Bill Passes House Financial Services Committee: April 2, 2025

Background: The House Financial Services Committee included H.R. 2392, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act of 2025, in a recent markup session. Committee Chair French Hill stated he expected “our discussion today will be passionate,” and his expectations were met during a marathon 10-hour debate, particularly regarding various proposed amendments to prohibit federal officials from "sponsoring, issuing, promoting or licensing" stablecoins in response to World Liberty Financial stating its intent to issue a stablecoin for its platform. The bill ultimately ended up passing through committee on a 32-17 vote, demonstrating a fairly strong bipartisan vote, though further changes can be expected before the bill reaches the House floor.

Analysis: Stablecoin legislation in 2025 now appears likely, but the two major questions remain: whether authority will be split between state and federal authorities, and whether stablecoins should be permitted to bear interest. Some argue that allowing interest bearing stablecoins will enhance utility, while others argue that it could undermine the existing banking system. An anti-central bank digital currency (CBDC) bill also advanced through the Committee, along party lines, though that bill is of limited practical importance, as any CBDC would likely require express Congressional approval.

SEC v. Ripple Settlement Progresses: March 25, 2025

Background: In our last Bi-Weekly update, we noted the then-available details regarding developments in the SEC v. Ripple case. Since then, further news was released that Ripple will also not be appealing the decision in its case against the SEC. The SEC will also ask the district court to lift the standard SEC injunction, but there is no guarantee that it will be approved.

Analysis: The settlement was finalized as both parties agreed to drop their respective appeals in the case, which dates back to 2020. Ripple agreed to pay a fine of $50 million, reduced from the original $125 million, in exchange for the SEC requesting the lifting of injunction requiring Ripple to register any future securities. The settlement signals the conclusion of one of the most anticipated crypto litigations. As discussed in the previous update, the settlement aligns with the general outlook of the SEC dropping non-fraud related crypto cases. On the other hand, Ripple remaining liable for a $50 million fine related to its institutional token sales leaves a door open for the SEC to argue that sales of tokens for the purpose of raising capital purposes might still be treated as securities offerings. While the settlement is a welcome resolution, the absence of a final judicial opinion leaves no precedent or legal guidance for future token offerings. With this litigation soon behind us, the industry can now focus on securing clearer regulatory guidance on digital assets.

Briefly Noted:

Digital Chamber Conference: Remarks by Commissioner Peirce: The Digital Chamber of Commerce held its annual Blockchain Summit on March 26th, with the Polsinelli BitBlog team actively participating. We were encouraged by the strong demonstration of bipartisan support for the industry — even in these highly partisan times — due in no small part to the efforts of the Chamber under Perianne Boring and now under the energetic new leadership of Coby Carbone, whom we had the pleasure of congratulating in person. Of particular note at the conference was SEC Commissioner Hester Peirce’s important address on the path ahead for building common-sense digital asset regulations.

SEC Chair Confirmation Hearing: Paul Atkins had his Senate confirmation hearing last week, but there wasn’t anything unexpected discussed. He has a lot of work ahead of him and will get plenty of help from the industry in the various upcoming roundtables. That said, it appears he may have already gotten a head start, with two of the three remaining SEC commissioners (Uyeda and Peirce) being former staffers of his. 

Securities Clarity Act Reintroduced: House Majority Whip Tom Emmer has reintroduced his Securities Clarity Act, which specifies that any asset sold as the object of an investment contract is distinct from the securities offering it was originally a part of. This definition is technology-neutral and applies to all assets sold or offered that would only be considered a “security” because of their inclusion in an investment contract. With the unclear status of the market structure bill, this would be a solid alternative along with SEC rulemaking and no-action letters.

FDIC Removes Crypto Limits: The FDIC has released a statement that it will no longer require supervised institutions that “engage in permissible crypto-related activities” to receive prior agency approval. Another big win for getting digital asset companies access to traditional banking.

Kentucky Self-Custody Law: Kentucky recently enacted a law that passed unanimously on a bipartisan vote and guarantees individuals the right to hold and manage their crypto in self-hosted wallets. Hopefully, we see similar protections at the federal level soon.

State Staking-as-a-Service Lawsuits Dropped: Fresh off the SEC clarifying its view that pooled PoW mining operations are not generally securities offerings, South Carolina, Kentucky and Vermont have all dropped their lawsuits against Coinbase alleging that its staking services qualified as securities. 

Circle Files to Go Public: USDC stablecoin issuer Circle has filed their S-1 to go public, aiming for a $5 billion valuation. Considering they had $1.68 billion in revenue and reserve income in 2024, that seems reasonable, even in less than optimal market conditions. Interestingly, the IPO filings also revealed Coinbase’s acquisition of a stake in Circle. This is just the first of the crypto companies going public in the upcoming months/years, if tariffs don’t derail those plans.

Defending the Fourth Amendment: It is worth reading this amicus brief from the DeFi Education Fund in a case regarding the Constitution’s Fourth Amendment protection against illegal search and seizure, specifically challenging the government’s subpoena powers over digital asset transaction records held by centralized exchanges.

Acting SEC Chair Asks for Guidance Assessment: Acting SEC Chair Uyeda has asked the staff to reassess certain guidance, which includes the Framework for “Investment Contract” Analysis of Digital Assets. This document was based on a 2018 speech by former SEC Bill Hinman. It appears the goal would be to clean the slate of past guidance muddying the waters in areas the current administration wants to change, including the prior approach to regulating digital assets.

Conclusion:

With the SEC announcing that certain “covered stablecoins” are not securities and a stablecoin bill advancing through the House Financial Services Committee, stablecoins were the most active area of regulatory development over the past two weeks. Ripple’s settlement with the SEC marks the close of one of the most closely watched crypto litigations to date — though it leaves much work ahead in the pursuit of clearer legal frameworks for digital assets. Other notable updates include the SEC Chair’s confirmation hearing, the reintroduction of the Securities Clarity Act, the FDIC’s removal of prior approval requirements for crypto-related activities, Kentucky’s new self-custody law, and Circle going public.