On April 4, 2025, Staff in the SEC’s Division of Corporation Finance issued a public statement on stablecoins. The statement opines that the offer and sale of “covered stablecoins” do not involve the offer and sale of securities, and that persons involved in minting covered stablecoins do not need to register their offer and sale with the SEC.

The Staff statement provides several characteristics of “covered stablecoins” for the purpose of its analysis, and the issuer of a stablecoin that does not meet these criteria may not be able to rely fully on the statement’s holding. In particular, the statement assumes that a covered stablecoin is backed by a reserve fund of high-quality assets (such as cash, cash equivalents or treasury securities), that the stablecoin is exchangeable one-for-one with a fiat currency (such as the US Dollar), and that the stablecoin is marketed solely for use in commerce, as a means of making payments, for transmitting money, or as a means of storing value, but not as an investment. The Staff further notes that covered stablecoins are typically marketed so as not to impart any governance rights to holders or to reflect any ownership interest in the issuer of the stablecoin. To support its conclusion, the statement also provides a brief analysis of a covered stablecoin under both the Supreme Court’s Howey test for investment contracts and the “family resemblance” test under the Supreme Court’s Reves case. Over the years, the SEC Staff has provided little guidance as to its views on the Reves test, so the Staff statement is interesting in that regard.

While the Staff’s guidance is helpful as a general starting point, it does not delve into several nuances among different varieties of stablecoins that could impact the security analysis. More generally, and as described above, the guidance makes a number of other critical assumptions about the structure of a hypothetical covered stablecoin as well. The guidance seems to imply that algorithmic stablecoins are out of scope and do not meet the criteria for a covered stablecoin, for example. Notably, the Staff guidance does not speak to the status of the reserve fund under the Investment Company Act of 1940, a topic outside the purview of the Division of Corporation Finance. SEC Commissioner Crenshaw also issued a public statement highly critical of the Staff’s analysis. With several bills on stablecoins making their way through Congress, we anticipate that the Staff statement will not be the last word from Washington on stablecoins.