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Stablecoins may be securities says SEC’s senior advisor for digital assets

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Valerie Szczepanik, the senior advisor for digital assets at the United States Securites and Exchange Commission noted that, with the current securities laws, stablecoins could face some issues. 

 

On March 16, Decrypt (a blockchain-based news website) gave a report of her comments.
Szczepanik, who is also referred to as the Crypto Czar, was appointed as the new associate director of the Division of Corporation Finance and senior advisor for Digital Assets and Innovation for Division Director Bill Hinman in June 2018.

 

Szczepanik in her statement, categorized stablecoins into three. One type is tied to real assets like gold or real estate, while the other type is tied to fiat currency which are held in reserves. The last category makes use of market financial mechanisms to ensure the stability of the price.

 

Szczepanik, explaining the last kind, said: “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.”

 

Szczepanik also revealed that since fluctuations in price over time are controlled by a central party, the last category of stablecoins “might be getting into the land of securities.”

 

She also explained that whether assets are tagged as stablecoins or something else, the SEC will always place projects at the same level of scrutiny. Szczepanik noted that: “Not to sound cliche, but we’d much rather people come to us and ask for [permission], or come talk to us before they do something, rather than doing something and then coming in and asking for forgiveness.”

 

As reported by Cointelegraph in December 2018, Basis (a stablecoin project based in the United States) has officially announced that it will close operations and give investors a refund after they confirmed that they wouldn’t be able to avoid a security classification for their secondary token.

 

Recently, Jay Clayton (the SEC chairman) seemed to confirm that, under the U.S law, Ethereum and other similar cryptocurrencies are not securities.

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