SEC Says Covered Stablecoins Not Securities, Coinbase CEO Brian Armstrong Applauds Move

In a significant development for the crypto industry, the U.S. Securities and Exchange Commission (SEC) has issued long-awaited guidance on stablecoins, offering regulatory clarity to a key segment of the digital asset market. The SEC’s Division of Corporation Finance clarified that certain stablecoins—referred to as "Covered Stablecoins"—will not be treated as securities under current U.S. law, provided specific conditions are met.

According to the statement, Covered Stablecoins are pegged 1:1 to the U.S. dollar, fully backed by low-risk, liquid assets held in reserve, and redeemable in USD. The SEC emphasized that the way these stablecoins are offered and sold, under the described conditions, does not involve a securities offering.

Coinbase CEO Brian Armstrong responded positively to the move, calling the guidance a “very helpful clarification.” The stablecoin sector is rapidly growing, especially as U.S. lawmakers prepare to introduce crypto-focused legislation in 2024, with stablecoins expected to take center stage.

However, the SEC drew a clear line: interest-bearing stablecoins would still fall under securities regulations. This means that stablecoin issuers cannot pay interest to users without triggering compliance obligations. Armstrong has publicly criticized this limitation, advocating for new laws that would allow interest payments to stablecoin holders, especially as reserve assets do generate yield.

He argued that while the technology exists to distribute such returns, U.S. regulations have yet to evolve. Armstrong urged lawmakers to ensure that future stablecoin legislation includes provisions for users to earn interest directly from reserves.

With this guidance, the SEC brings much-needed regulatory stability to the stablecoin market, though key debates—especially around yield—remain unresolved.