SEC declares certain stablecoins are not securities
This week, the Securities and Exchange Commission (SEC) made a formal declaration that stablecoins, particularly “covered stablecoins,” are not securities, meaning they do not need to be registered with the SEC before entering the market. That clarification, while probably unnoticeable to most crypto users, could mark a significant step forward for the institutional adoption of stablecoins.
The SEC defines a “covered stablecoin” as one that’s backed by U.S. dollars and/or other low-risk, highly liquid assets, like treasury bills, that allow issuers to meet redemptions on demand. They go on to say that those stablecoins are explicitly different from algorithmic stablecoins, which use an algorithm for supply/demand balancing rather than collateral to maintain their price peg.
The Commission reached this conclusion by extending two tests from two different court cases: Reves v. Ernst & Young
and SEC v. W.J. Howey Co. Both tests are frameworks used to determine whether something qualifies as a security. Covered stablecoins didn’t meet the criteria of either test and as a result, the SEC ruled that they fell outside securities laws.
Similar to most of the regulation and deregulation that has come out of various administrations this year, retail users probably won’t notice much of a change, but for crypto corporates and legacy financial institutions, this statement from the SEC could be significant since it opens the door to digital assets playing a bigger role in the world of banking and finance.
Since the SEC declared that certain stablecoins are not securities, that removes a major legal risk for banks, fintech firms, and payment processors who want to integrate stablecoins into financial services, as a result, this should make it easier for stablecoin issuers to form partnerships with traditional financial institutions, and it clears the path for bank-backed stablecoins or stablecoin-as-a-service offerings in the world of banking and finance.
DOJ disbands crypto enforcement team
The SEC wasn’t the only government agency this week to make a decision related to crypto. The Department of Justice (DOJ) announced it would disband the National Cryptocurrency Enforcement Team—a unit previously dedicated to investigating and prosecuting crypto-related crimes.
The news came via a memo from Deputy Attorney General Todd Blanche, who stated, “The Department of Justice is not a digital assets regulator. However, the prior Administration used the Justice Department to pursue a reckless strategy of regulation by prosecution.”
The DOJ says this change was made to comply with President Donald Trump’s January executive order on digital assets, which emphasizes creating clear regulatory frameworks for crypto and stablecoins. While it’s unclear how shutting down this unit helps comply with that order, it does clarify what the DOJ won’t be doing: regulating crypto markets.
Instead, the DOJ says it will now prioritize prosecuting individuals who use digital assets in connection with real criminal activities like terrorism, narcotics, human trafficking, organized crime, and cybercrime. This signals a shift away from targeting crypto companies just for operating in the USA and toward cracking down on actual bad actors using digital assets to commit real crimes.
This seems like another indication that this administration is keeping its word on being “pro-crypto.” One by one, the Trump administration removes obstacles that made it difficult for crypto companies to operate in the U.S. Even though those actions are arguably positive for the industry, they still leave the industry with an unanswered question. While it’s helpful to know who doesn’t regulate crypto, we’re still left without a clear answer on which agency does.
That ambiguity might not be a big deal right now, especially under a friendly administration, but it could become an issue in the future. When the next crypto conflict inevitably occurs, knowing who is actually in charge will matter a lot when it comes time to investigate and prosecute the illicit actors.
MicroStrategy’s $5.9 billion BTC loss
Strategy (NASDAQ: MSTR) (formerly MicroStrategy) filed its Form 8-K with the SEC this week, and while these filings are routine for public companies, this one got blockchain and crypto enthusiasts talking, particularly because of what the filing revealed about MicroStrategy’s financial health in relation to its massive BTC holdings.
Three points from the filing standout:
(1) Strategy reported an unrealized loss of $5.91 billion on its digital asset holdings for the quarter ending March 31, 2025. As a result, they expect to post a net loss for that quarter.
(2) Due to previous net losses, primarily from digital asset impairment, the company warned that it “may not be able to regain profitability in future periods.”
(3) And this one really got people talking: the company said it may be forced to sell BTC to meet its financial obligations.
Form 8-Ks require companies to spell out all the possible risks, so this isn’t necessarily an emergency. But what caught my attention was how clear they were about how holding BTC has actually hurt them and how it may continue to hurt them. The company did all but admit that its Bitcoin strategy, the cornerstone of its brand, maybe the very thing that causes the company to unravel.
The filing clarified that Strategy’s financial health is deeply tied to BTC’s performance. If the digital asset performs poorly or regulatory shifts turn against crypto, the company could face severe consequences, not just in stock price but in its ability to raise capital or continue operating.
This is also the first time I remember the company mentioning the potential sale of BTC. People often cheer when publicly traded companies buy BTC, but what gets lost in the noise is that these companies always have an exit plan. Nobody’s holding BTC for eternity. Whether it’s selling when prices hit a target or offloading during a financial crunch like what Strategy is thinking about, there’s always a point when the corporate will cash out.
The fact that Strategy openly admits that BTC has become a financial liability and that it might have to sell raises big questions about how other corporations will approach digital assets moving forward. Especially if the data is beginning to show that holding Bitcoin might not be the boon that people believed it to be.
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