Senior advisor for digital assets at the United States Securities and Exchanges Commission (SEC) Valerie Szczepanik explained why some stabelcoins might be securities. 

Known as the Crypto Czar, Sczepanik assumed the 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. Speaking at Austin’s SXSW conference, she explained what types of stablecoins are currently out there.

By and large, she believes there are three categories. Some coins are backed by real assets, i.e. gold or real estate. Some are fiat-pegged. Others use market financial mechanisms to stabilize the coin’s price. She explained what this means:

“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.”

She went on to note that the fact that there is a central party controlling prices might spell trouble. This means that these types of stablecoins “might be getting into the land of securities.” After all, if someone guarantees a profit or controls the price, this might be a security.

She also noted that all potential projects should first consult with the SEC. She emphasized that it is better than “doing something and then coming in and asking for forgiveness.”

Stablecoins are growing in popularity

Sczepanik’s comments are noteworthy, as stablecoins are attracting more investors. According to a report by Diar, there was “a whopping 1032% increase in on-chain transactions took place in November vs. September breaching the $2.3Bn mark at the close of last month.”

Moreover, new stablecoin projects are constantly springing up with Facebook reportedly launching its own one soon.

Previously, Basis, the United States-based stablecoin, closed its project in 2018 because they could not avoid being classified as securities.

On a different note, Jay Clayton, SEC’s Chairman, confirmed Hinman’s view of why ETH and the like are not securities.

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