SEC Chair Suggests Some Stablecoins Might Be Considered As Securities
According to SEC Chair, Gary Gensler, Stock tokens and stablecoins backed by securities should be treated as securities under U.S. law – hinting that more lawsuits might follow.
Cryptocurrencies whose prices depend on more traditional securities might fall under securities laws, said Securities and Exchange Commission (SEC) Chair Gary Gensler.
Speaking to the American Bar Association on Tuesday, the SEC Chair pointed out that some platforms are offering crypto tokens “that are priced off” securities and resemble derivatives products. According to Gensler, any security-based products will have to comply with trade reporting rules and other laws.
He said:
“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities.”
“These platforms – whether in the decentralized or centralized finance space – are implicated by the securities laws and must work within our securities regime.”
Gensler warned that SEC might bring future enforcement actions as well, noting that “we’ve brought some cases involving retail offering of securities-based swaps,” seemingly referring to a case the US regulator brought against financial app Abra, which paid $300,000 in penalties on charges of selling security-based swaps to retail investors last year.
Crypto exchange Binance recently announced closing of its stock token business, though technically U.S. customers should not have been able to access this service in the first place.
Gensler didn’t point out any specific tokens in his speech, but his remarks come amid increased regulatory scrutiny around digital assets – especially stablecoins – which are mentioned increasingly in congressional hearings.
Yesterday, Circle, the issuer of USDC stablecoin, published a breakdown of the assets backing it. In addition to 61% cash, the token is backed by money market funds, commercial paper, corporate and municipal bonds and certificates of deposits issued by foreign banks.
Some of these reserves, including the money market funds, bonds and commercial paper, are currently treated as securities under U.S. law.
The issuer of the world’s largest stablecoin, Tether (USDT), has also stated its reserves included investments in commercial paper and corporate bonds.
The SEC head isn’t alone in his view that stablecoins that are backed by securities should be treated as securities. U.S. Rep. Warren Davidson (R-Ohio) previously said that “it gets hard to say” that such a stablecoin isn’t itself a security.
Davidson said:
“I think you could easily craft a stablecoin that meets a test that says ‘no, this is not a security’.”
Stablecoins that are backed by securities should be regulated by the SEC, he continued.
