Last week the U.S. Securities and Exchange Commission (SEC) issued a statement on stablecoins, outlining how some ‘covered’ stablecoins will not be considered as securities. Unsurprisingly, this mainly includes certain fiat-backed stablecoins that do not provide a yield or interest to the stablecoin holders.
For those stablecoins that don’t qualify as covered, the SEC doesn’t say they are securities, it just does not express a view about them. That includes non-USD stablecoins, commodity linked stablecoins and algorithmic stablecoins.
Our interpretation of the statement is that Tether would not be classed as a ‘covered’ stablecoin. That’s because the SEC requires reserves for USD stablecoins to be held in “low-risk and readily liquid” assets and explicitly states that these “do not include precious metals or other crypto assets.” Around 9% of Tether’s reserves are metals and crypto. At least another 8% of Tether’s reserves would almost certainly not qualify as low risk and readily liquid.
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