Crypto coins
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Under the U.S. Securities and Exchange Commission’s (SEC) shifting approach to the crypto sector, certain stablecoins are joining “memecoins” as cryptoassets that likely don’t fall under securities law, according to the regulator’s fast-evolving views.

The SEC’s corporate finance division issued a statement on so-called “covered” stablecoins — tokens that are pegged to the U.S. dollar and backed by liquid, low risk assets (as opposed to algorithmic stablecoins, which aren’t backed by reserves) — setting out its opinion that they typically shouldn’t be considered securities.

And, as a result, the process of “minting” covered stablecoins doesn’t require registration or an exemption, it said.

The regulator said that covered stablecoins are typically created to use as a digital payment vehicle or as a store of value, not as an investment — and so, don’t meet the basic definition of a security or investment contract.

“Because covered stablecoins do not pay or guarantee to pay interest or otherwise convey any rights to payments or assets except upon redemption for [U.S. dollars] on a one-for-one basis, the buyer is not motivated to purchase and own the covered stablecoin for profit,” it said.

At the same time, stablecoins are generally issued and purchased for commercial rather than investment purposes, it said.

And hey are distributed in a way that doesn’t encourage speculative trading or investment, it said, adding, “A reasonable buyer would likely expect that covered stablecoins are not investments.”

The SEC’s corporate finance division recently took a similar position on so-called memecoins, ruling that they are typically created for entertainment, and so don’t generally meet the test to be considered securities. And, it declared that crypto mining activity doesn’t fall under securities law either.