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Certain dollar-backed stablecoins that can be redeemed at a one-to-one ratio aren’t deemed securities under US federal law, and issuers and intermediaries for these entities that comply with the definition are freed from certain requirements, the Securities and Exchange Commission said yesterday. 

Issuers and intermediaries for stablecoins that meet the criteria don’t have to register the offer, sale, minting or redemption of such stablecoins with the SEC, the regulator said in a statement. 

The message comes at a time when regulators continue to examine various cryptocurrency and digital assets rules. The SEC said its statement could “open the door for greater adoption of stablecoins in traditional financial infrastructure.”

“While most crypto exchanges already use stablecoins as their preferred payment rail, broker-dealers, clearing firms and fund administrators may begin exploring fiat-backed stablecoins as forms of payment, especially for after-hours or cross-border transactions,” it said.

Stablecoins are backed by a specified asset or basket of assets which they use to maintain a stable value against that asset. This is usually a country’s currency, such as the dollar. This makes stablecoins different from crypto assets such as bitcoin which tend not to have assets as backing and so, are more volatile.

The SEC said such 1:1 dollar-backed stablecoins are marketed for making payments, transmitting money, and storing value, not as investments, and do not provide holders with rights to interest, profits or governance.

The regulator said its statement does not apply to algorithmic stablecoins, yield-bearing tokens or coins redeemable for non-US dollar assets.