All the innovation in the world may ultimately prove useless if it can’t scale.
For digital asset like stablecoins, regulatory clarity is key to scalability. The industry knows this, and, increasingly, the U.S. government knows this.
That’s why the financial services and payments landscape is being primed for an on-chain change.
Fresh off of the White House’s crypto sector report, “Strengthening American Leadership in Digital Financial Technology,” the U.S. Securities and Exchange Commission (SEC) is now issuing guidance and forming advisory groups to streamline the integration of crypto products into traditional financial ecosystems.
The agency’s latest push is the launch of “Project Crypto,” an SEC-wide initiative to modernize securities rules and regulations, as part of which the SEC has issued interim guidelines suggesting that USD-pegged stablecoins could be classified as cash equivalents, contingent on having guaranteed redemption mechanisms.
By delineating a narrow set of compliance criteria for “Covered Stablecoins,” the SEC has effectively opened the door for these digital assets to function as regulated, fiat-linked payment instruments. The path forward may conditional and constrained — but for the first time in U.S. commerce, it is potentially navigable.
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Read more: Stablecoin Retail Use Still a Rounding Error as Attention Swings to B2B
What the Guidance Means for Payments Infrastructure
Stablecoins, digital tokens pegged to national currencies like the U.S. dollar, have evolved rapidly since their early use in crypto trading. They now represent a sizable global market and have become, in some regions, essential to cross-border remittances and B2B payments. However, domestic retail adoption has remained limited, particularly across retail use cases.
“The crypto market cap is $3 trillion, and the stablecoin market cap is $250 billion, meaning it’s less than 10%. If you want to build a payments network, you need to solve the divide so shoppers can walk in and pay with their assets, while merchants receive the payment as stablecoin,” Mesh CEO and Co-founder Bam Azizi told PYMNTS earlier this summer.
The SEC guidance, while just the agency’s view and not a true legal policy, has concluded that certain dollar-backed stablecoins, when structured and operated within defined parameters, would likely not be considered securities under the Howey, Reves, or Gary Plastic tests — the primary legal frameworks for evaluating investment contracts and notes.
The SEC staff statement defines “Covered Stablecoins” by reference to four key characteristics: purpose, redemption rights, reserve composition and reserve parity.
First, the stablecoin in question must be designed and marketed solely for use in payments, value transmission or as a store of value — not for speculative investment or yield generation. The issuer must also provide holders with enforceable rights to redeem the stablecoin on demand at par (1:1 with USD). These rights must be contractually guaranteed and not subject to issuer discretion.
Third, the stablecoin must be backed exclusively by U.S. dollar cash and cash equivalents, specifically, insured bank deposits, U.S. Treasury bills or government money market funds. Riskier collateral (e.g., commercial paper, crypto assets, equities) is excluded. And finally, the value of the reserves must meet or exceed the outstanding stablecoin liabilities at all times. Reserves must be held in segregated accounts and subject to regular attestation by a registered public accounting firm.
The guidance provides a clear compliance pathway for U.S. payment service providers (PSPs) to adopt stablecoin rails without triggering securities liability.
See more: Why Stablecoins Are Stuck at the Acceptance Hurdle
A Critical Inflection Point for Stablecoin Payments
It is important to emphasize that the SEC’s staff statement is non-binding guidance, not a safe harbor or final rule. It represents the views of the Division of Corporation Finance and does not carry the force of law. Still, in practice, such guidance serves as a de facto greenlight for firms that operate within its parameters.
It also comes at a time when bank executives “overwhelmingly worry” that large corporations like Amazon and Walmart will bypass new prohibitions on interest-paying stablecoins under the recently enacted GENIUS Act.
To support “Covered Stablecoins,” PSPs and merchants may need to make significant investments in back-office infrastructure and legal contracting.
The retail sector, from eCommerce platforms to grocery chains, must also adapt. Integrating stablecoins into point-of-sale terminals, accounting software and treasury operations will require middleware or API solutions that can reconcile blockchain-based tokens with existing ERP systems.
