Senior advisor for digital assets at the United States Securities and Exchanges Commission (SEC) Valerie Szczepanik reportedly noted that stablecoins could experience issues under current securities laws. Blockchain-related news website Decrypt reported her comments on March 16.
Szczepanik, also known as the Crypto Czar, was appointed to the new position of associate director of the Division of Corporation Finance and senior advisor for Digital Assets and Innovation for Division Director Bill Hinman in June of 2018.
When Szczepanik reportedly made the statement concerning securities at Austin’s SXSW conference on March 15, she also broke stablecoins into three categories.
One kind of stablecoins are the ones tied to real assets such as gold or real estate, and another type are the ones tied to fiat currency held in reserves, in Szczepanik’s classification. The third and last category uses market financial mechanisms to keep the price stable. Explaining the last kind, Szczepanik 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 reportedly said that since a central party controls the price fluctuations over time, that last kind of stablecoins “might be getting into the land of securities.” According to her, if buyers are promised that somebody else will be holding or guaranteeing a profit or controlling the price, the token could be a security.
Ultimately, she explained, whether the asset is labeled as a stablecoin or anything else, the SEC will always subject projects to the same level of scrutiny. She noted:
“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.”
The United States-based stablecoin project Basis has officially stated that it will close operations and refund investors after they confirmed that they couldn’t avoid a security classification for their secondary token.
More recently, SEC’s chairman Jay Clayton seemed to confirm that Ethereum (ETH) and cryptocurrencies like it are not securities under U.S. law.