SNG: New era: Are stablecoins legitimising the future of digital asset transactions?

By Zawya07:27 (UTC), 13 October 2026 Updated

By Staff Writer

Cryptocurrency regulations and legislation have been topics of debate by Congress, regulatory authorities, and the finance industry for the better part of the last decade. Cryptocurrency as an asset class has pinballed between the interests of those who want more oversight and protections versus those who value these assets precisely for the freedom and decentralization they offer.

Stablecoins, although in existence since 2014, have recently gained more traction as a legitimate and practical way to leverage digital assets without assuming the same level of risk inherent in other cryptocurrencies.

Part of this legitimacy comes from the structure of stablecoins themselves — the other part stems from various rules seeking to regulate and provide more certainty for consumers regarding the rules surrounding stablecoins. While recent legislation has ‌made progress toward this goal, several open-ended questions still remain regarding how stablecoins will ultimately be treated.

What are stablecoins?As the name suggests, stablecoins are (at least in theory) a more "stable" subset of cryptocurrency with value that is "pegged" or tied to a real-world asset, including traditional fiat currencies like the US dollar. Traditional cryptocurrencies (i.e., those not backed by real-world assets) have been susceptible to volatile changes in value, often making them unreliable for conducting everyday financial transactions.

Stablecoins as a concept seek to dispel some of this uncertainty by tethering their value to another asset, while still retaining the attributes that make cryptocurrency appealing to consumers, namely the benefits of a decentralized system not reliant on traditional banks and the efficiency and speed of blockchain technology.

Stablecoins can be pegged to a variety of different assets but typically adhere to one or more of the categories below:(1) fiat-backed: pegged to a traditional form of currency (the current most popular stablecoin is Tether, a fiat-backed coin with a 1:1 ratio with the U.

S. dollar)(2) commodity-backed: backed by reserves of certain valuable commodities like gold, silver, oil, real estate, etc.(3) crypto-backed: backed by other cryptocurrencies (the value of the cryptocurrency in reserve is often greater than that of the stablecoin in order to account for the reserve cryptocurrency's potential value fluctuations)(4) algorithmic: the number of stablecoins in circulation is set by an algorithm to maintain value stabilityStablecoins rely on third-party auditors to review reserve composition and attest that the quantity of reserves is commensurate with the value of the stablecoins that are issued.

The Genius Act and SEC interpretationIn July last year, the Trump administration passed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act a federal law creating a regulatory framework for stablecoins specifically.

Section 2(22) of the Act defines a class of stablecoins it refers to as "payment stablecoins" which are digital assets used as a means of payment or settlement where the issuer: is obligated to "convert, redeem, or repurchase for a fixed amount of monetary value"; and must work to reasonably maintain "a stable value relative to the value of a fixed amount of monetary value."In other words, "payment stablecoins" refer to fiat-backed stablecoins that are pegged to the US dollar and can be used as a means of payment. On March 17, the SEC and CFTC issued an interpretive release that further clarified that payment stablecoins as defined by the GENIUS Act and issued from permitted issuers would not be treated as securities.

However, the release noted that permitted issuers are prohibited under the GENIUS Act from paying "any form of interest or yield to the permitted stablecoin holders (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention of the payment stablecoin."Additionally, the SEC cautioned that "[s]tablecoins other than payment stablecoins issued by a permitted payment stablecoin issuer may meet the definition of 'security' depending on the facts and circumstances."Could a stablecoin ever behave like a security?When considering whether a digital asset might be subject to federal securities laws, the SEC considers whether the asset functions as an "investment contract." This determination has historically been made via the Howey test (SEC v. W.

J. Howey Co., 328 U.

S. 293 (1946)).

For an asset to be subject to an investment contract, it must meet three criteria: (1) the investment of money (2) in a common enterprise (3) with a reasonable expectation of profits to be derived from the managerial efforts of others.