SEC Declares Dollar Backed Stablecoins Are Not Securities

The crypto crowd just got a little relief and a whole lot more clarity. On April 4, 2025, the SEC's Division of Corporation Finance finally broke its long-standing awkward silence on stablecoins. In a rare move, the SEC said less red tape is needed for certain tokens. The verdict? Some stablecoins, boringly safe and backed one-to-one by U.S. dollars or equivalent assets, don’t count as securities. No registration, no lawsuits, and no midnight sweat for compliance teams. That’s music to the ears of fintech CFOs and crypto-backed accountants alike. But don’t pop the champagne just yet, there’s the fine print. Lots of it.

Not Your Average Digital Dollar

The SEC’s new darling is a very specific breed called “Covered Stablecoins.” These are the digital assets that behave like loyal puppies: predictable, steady, and low-risk. They must:

• Maintain a 1:1 value with the U.S. dollar
• Be backed by high-quality, liquid reserves (no, gold bars and other crypto assets don’t count)
• Be redeemable on demand, without funky delays or minimums
• Exist purely for payments, money transfers, or value storage, not investing

Think USDC, not the Wild West of algorithmic tokens. According to the SEC, minting or redeeming these won’t trigger securities laws, so long as they stick to these rigid rules. In plain English: if your stablecoin is acting like a dollar and not trying to be a profit engine, the SEC is (finally) not interested.

Why Earning Yield Still Raises Eyebrows

Here's where it gets tricky. Want to pay interest to stablecoin holders? That might flip the switch back to “security,” and suddenly you’re in SEC territory. This line in the sand has sparked debate, especially from Coinbase CEO Brian Armstrong, who called out the no-yield stance. In his words: “I’m concerned about this idea that consumers cannot get interest on stablecoins.” Translation: we want to compete with banks, but the SEC says, “Not so fast.”

According to the Commission, interest-bearing stablecoins could create an expectation of profit, and that’s a Howey test no-no. So, for now, stablecoins that pay out extra perks or returns risk being labeled securities. That also means more compliance, more lawyers, and potentially more enforcement actions.

Two Bills, One Goal

While the SEC tossed a bone to stablecoin issuers, lawmakers in D.C. are moving in to write the house rules. The House Financial Services Committee just passed the STABLE Act, a cleverly named attempt at bringing transparency and accountability to stablecoin issuance. Across the hall, the Senate Banking Committee advanced the GENIUS Act, which sounds like it came out of a Silicon Valley brainstorming session.

Both bills aim to build a federal framework around stablecoins, one that gives the Fed more oversight and sets guardrails for issuers. President Trump has even tossed in his two cents, signaling he wants legislation on his desk before the August recess. If you blink, stablecoin laws might become a reality faster than expected. But not everyone’s clapping. Democrats argue that the STABLE Act could leave consumers exposed by sidelining the Fed’s authority over state-regulated digital wallets. So, while the legislation is gaining steam, it’s still got potholes to fill.

Stablecoins Are Growing Up

Here’s a fun fact: stablecoins are becoming crypto’s breakout star. The market has grown by 11% this year alone, and by 47% over the past 12 months. The two big dogs, Tether (USDT) and Circle’s USD Coin (USDC), dominate the scene, with over $13 billion parked in yield-bearing versions alone. They’re no longer just for crypto nerds. Financial institutions, fintech platforms, and even big-name retailers are eyeing stablecoins for faster settlements, cross-border payments, and dollarized savings.

Circle, for instance, is trying to ride the momentum to Wall Street. The USDC issuer just filed for an IPO, hoping to follow in Coinbase’s 2021 footsteps. If successful, it could become one of the few pure-play crypto firms with a front-row seat in the public markets.

Don’t Mistake Clarity for a Green Light

Let’s not confuse the SEC’s statement with a love letter. This isn’t a regulation or even formal guidance, it’s more like a “hey, we won’t sue if you follow these steps” kind of memo. And buried in the footnotes is the usual lawyer speak: each token still needs a case-by-case look. If your stablecoin steps out of line, think yield, crypto-backed reserves, or restrictions on redemption, it could still be in the SEC’s crosshairs. But all in all, this is a much-needed win for compliance teams and CFOs navigating the crypto-finance bridge. It marks a small but mighty shift in how Washington views digital dollars. To quote the late George Carlin: “Just because you got the monkey off your back doesn’t mean the circus has left town.” The circus is still very much in session, but at least, for now, the stablecoin tent looks a little less chaotic. Stay ahead in accounting and finance—subscribe to MYCPE ONE Insights for weekly updates, expert takes, and breaking news straight to your inbox.