Why The SEC Thinks Some Stablecoins Could Be Securities

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Cryptocurrencies just can’t catch a break. The lack of any form of substantial warranty from cryptocurrencies in general, including stablecoins, seems to keep worrying regulators everywhere, especially in the USA. Even though cryptocurrencies seemed to experience a little growth over the past few weeks, most governments are against the idea of major implementation. It’ll be a long time until cryptocurrencies can become a major player in financial markets, but they’re definitely changing the landscape.

Valerie Szczepanik, Senior Advisor for Digital Assets of Securities and Exchange Commission (SEC), recently commented on an interview about her optimism to promote the crypto market under the appropriate regulations and laws that it would require. According to Szczepanik, some companies have already begun to implement cryptocurrencies within some level, which is why the SEC needs to be able to evaluate the impact and risks associated with such transactions within the American market, promoting the appropriate regulations to ensure a safer environment for participants while also determining the sanctions applicable in each particular case.

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Szczepanik commented specifically about stablecoin, dividing them into what it seems 3 major categories. First, there are those that are backed by gold or real estate, then the ones that are backed by fiat currency and finally the ones that use some sort of market financial mechanism to keep its price stable. According to the last category explained, Szczepanik commented saying:

I’ve seen stablecoins that purport to control price through some kind of pricing mechanism, whether it’s tied to the issuance, creation or redemption of another type of digital asset tied to it, or whether it is controlled through supply and demand in some way to keep the price within a certain band.

Valerie Szczcepanik

According to her own conclusions, Szczepanik believes that given that this type of stablecoins are basically controlled by a central party, the price can also be easily manipulated and could get easily confused with the definition of securities. As such, if a buyer is promised some sort of profit or control over the price, the definition of security gets easily confused within those type of stablecoins.

The risk associated with crypto assets is basically linked to this specific fact, which according to Szczepanik could lead to major scams. This is why, in order to avoid and prevent people getting scammed, the SEC is looking into supervising each individual project, to ensure it possesses all the means necessary to cover for each one of the cryptocurrencies they issue, regulating the ones similar to securities as such, applying security law regulations.

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