As the U.S. Congress revisits the STABLE Act in 2025, and new bills like the FIT21 Act gather momentum, the digital asset industry is approaching a pivotal moment. Amid the growing systemic relevance of stablecoins and the regulatory vacuum that has long defined crypto in the U.S., a clearer legal framework finally seems within reach.

This article unpacks how the STABLE Act fits into the broader evolution of U.S. digital asset regulation, starting with the foundational question of token classification, and ending with what this means for projects operating, or hoping to operate, in the U.S. market.

Token Classification in the U.S. (The Bedrock Issue)

Before analyzing any new regulation, it’s important to understand the unresolved tensions at the heart of U.S. crypto law, especially when it comes to the classification of tokens.

Security vs. Commodity vs. Money

The U.S. legal system ultimately has no real unified definition of what a digital asset is. Depending on its function and structure, a token could be treated as:

1. A Security (regulated by the Securities and Exchange Commission) if it meets the Howey Test: which involves an investment of money in a common enterprise with an expectation of profit from the efforts of others.
2. A Commodity (regulated by the Commodity Futures Trading Commission) if it is used as a tradable asset or derivative.
3. A Payment Instrument (under the Financial Crimes Enforcement Network or Office of the Comptroller of the Currency) if it facilitates monetary transfer or settlement.

Stablecoins, especially fiat-backed ones like USDC or Tether, do particularly blur these lines. While they may not qualify as “investment contracts” in the traditional sense, their roles in DeFi protocols, use as collateral, and function in arbitrage strategies, do in fact introduce elements that would typically be associated with capital markets.

Regulatory Tug-of-War

This ambiguity in token classification has led to aggressive enforcement actions by the SEC against token issuers and exchanges. For instance, the SEC has pursued aggressive enforcement actions against projects like Ripple Labs, alleging that its XRP token constitutes an unregistered security. Similarly, platforms such as Coinbase have faced investigations and legal battles over offering what the SEC claims are unregistered securities in the form of certain listed tokens.

At the same time, the CFTC has exercised only limited oversight, primarily focused on crypto-based futures and derivatives. For example, it has taken enforcement action against Binance for alleged violations of commodities laws, but its jurisdiction does not clearly extend to the broader spot market or token issuance.

Stablecoins, despite their skyrocketing use in cross-border payments, remittances, and decentralized finance (DeFi) protocols, remain largely unregulated. Tokens like USDC and Tether (USDT) facilitate billions in daily transactions, yet there is no comprehensive federal framework outlining whether these instruments should be treated as securities, commodities, or payment instruments, leading to contradictory approaches among agencies.

The result is a legal grey zone where developers, projects, and investors face significant regulatory risk without clear pathways to compliance.

The STABLE Act: Bringing Stablecoins into the Banking Fold

Originally introduced in 2020 and now reintroduced in 2025 amid renewed momentum, the STABLE Act (Stablecoin Tethering and Bank Licensing Enforcement) proposes a stringent regime for stablecoin issuance.

Key Provisions

• Banking Charter Requirement: All stablecoin issuers must register as insured depository institutions, effectively treating stablecoins like digital bank deposits.
• Federal Reserve Oversight: Issuers would need approval from the Federal Reserve before launching or maintaining stablecoins.
• Liquidity & Capital Requirements: Issuers must meet reserve, capital adequacy, and operational risk standards similar to traditional banks.
• FDIC Insurance Mandate: User balances may require deposit insurance, aligning with consumer protection norms.

The Act’s goal is to eliminate “shadow banking” practices and ensure that digital dollar substitutes don’t undermine financial stability or evade monetary policy.

Recent Developments (April 2025)

As of April 2, 2025, the STABLE Act is under active discussion in the House Financial Services Committee, where lawmakers held a markup session to debate and amend the bill. However, no final vote has yet been scheduled, and the bill continues to face political headwinds, including pushback related to concerns over private sector innovation and financial surveillance.

Meanwhile, the Senate Banking Committee has approved a competing bill, the GENIUS Act, which takes a more innovation-friendly approach to regulating stablecoins. It remains to be seen how the two legislative paths will converge, but the momentum for stablecoin regulation is now undeniable.

Regulatory Clarity: The SEC’s Covered Stablecoin Statement (April 4, 2025)

Adding a significant milestone to the stablecoin regulatory landscape, the U.S. Securities and Exchange Commission’s Division of Corporation Finance issued a statement on April 4, 2025, clarifying its view on fiat-backed stablecoins, referred to as “Covered Stablecoins”.

According to the Division, Covered Stablecoins are crypto assets pegged 1:1 to the U.S. Dollar, backed by low-risk, highly liquid reserves, and redeemable on demand directly with the issuer or designated intermediaries. Most notably, the SEC stated that such stablecoins, when offered and sold under the described conditions, do not constitute as securities under either the Securities Act of 1933 or the Exchange Act of 1934. This conclusion was reached through a combined Reves and Howey test analysis, emphasizing:

1. The lack of speculative intent from purchasers;
2. Marketing framed around utility and payment functions, not investment;
3. The existence of a fully backed reserve system designed to minimize risk;
4. The absence of profit-sharing, governance rights, or interest-bearing features.

This position represents a substantial development, offering a much-needed safe harbor for compliant fiat-backed stablecoin issuers like Circle (USDC) or Paxos (USDP), and may ease regulatory burdens under the current legal regime, even as Congress debates more sweeping frameworks like the STABLE and FIT21 Acts.

The Implications of the STABLE Act:

Private Stablecoins could become prohibitively expensive to issue without bank-level infrastructure. For example, companies like Circle, the issuer of USDC, might be required to establish a full-fledged banking infrastructure to remain compliant, an operational and regulatory burden that could deter smaller innovators from entering the market altogether.

Decentralized Projects might be excluded entirely from compliance, or forced into legally novel contortions. For example, decentralized issuers, particularly DAO-governed stablecoins or algorithmic models like DAI or Frax, may find themselves in a legal dead-end. If there is no centralized party to license, regulate, or hold accountable, the Act raises existential questions. Could a DAO own a bank? Can protocol-based issuance meet Federal Deposit Insurance Corporation standards?

U.S. Competitiveness in stablecoin innovation could decline, pushing development offshore. If domestic innovators face insurmountable regulatory hurdles, they may shift operations overseas to more permissive jurisdictions, something already visible with projects like Tether, which is headquartered in the British Virgin Islands and Hong Kong. This offshore migration could leave the U.S. lagging behind in shaping the future of digital finance.

The Digital Asset Task Force (2024): A Coordinated Approach:

In parallel, 2024 saw the creation of the Digital Asset Task Force, a joint effort between:

• U.S. Treasury
• Federal Reserve
• Securities and Exchange Commission (SEC)
• Commodity Futures Trading Commission (CFTC)
• Office of the Comptroller of the Currency (OCC)

This Task Force is tasked with:

1. Establishing interagency protocols for crypto enforcement.
2. Creating stablecoin monitoring tools to track systemic risk.
3. Developing frameworks for cross-border coordination with the FATF and FSB.

For the first time, we’re seeing institutional alignment around treating stablecoins not merely as technical innovations, but as monetary instruments with systemic consequences.

FIT21: Toward a Comprehensive Framework

In the background, the Financial Innovation and Technology for the 21st Century Act (FIT21) continues to gain traction. Unlike the STABLE Act, which targets only stablecoin issuers, FIT21 proposes a holistic digital asset regulatory framework.

Key Features of FIT21

1. Clear token classification: Differentiates between digital securities and digital commodities.
2. Regulatory safe harbors: Allows projects to launch tokens under a probationary framework before SEC/CFTC determination.
3. Disclosure requirements: Ensures investor protection through whitepaper-style documentation.
4. Regulated intermediaries: Mandates registration for exchanges, custodians, and liquidity providers.

FIT21 could offer a regulatory on-ramp for projects that currently face only cliffs and barriers.

What This Means for Web3 Projects Targeting the U.S.

• Legal Complexity Increases: Issuers of stablecoins, synthetic tokens, or any pegged digital asset must now navigate a thicket of regulatory regimes, banking, securities, commodities, and payments law. Legal structuring is no longer optional; it’s mission-critical.
• Compliance Costs Will Rise: Expect higher barriers to entry. Banking licenses, compliance staff, legal opinions, and audits will become entry tickets, especially for fiat-backed stablecoins.
• Decentralized Models at Risk: Algorithmic or protocol-based stablecoins may find it difficult, if not impossible, to comply. Even DAOs may be classified as issuing entities, subject to banking or securities obligations.
• Secondary Market Risk: U.S. based exchanges, wallets, and custodians face growing liability if they list or support tokens later reclassified as unlicensed securities or improperly issued instruments.
• Jurisdictional Strategy Becomes Critical: Projects will need to consider offshore structuring, jurisdictional ring-fencing, and restricted U.S. user access if they wish to avoid entanglement with U.S. regulators.

Conclusion: Toward a More Defined Future - But With Trade-Offs

The STABLE Act and FIT21 signal a transition from regulatory ambiguity to structured oversight in U.S. crypto regulation. However, structure comes with trade-offs: it favors the banked, the well-capitalized, and the centralized. Centralized issuers may thrive under a clear, albeit demanding, legal framework. Decentralized protocols, by contrast, face existential questions, particularly when there is no centralized entity to license, supervise, or hold accountable.

In this climate, the SEC’s April 2025 statement on “Covered Stablecoins” offers a rare moment of clarity. By confirming that fiat-backed stablecoins with robust, transparent, and redeemable reserve systems are not considered securities, the Division of Corporation Finance provides a regulatory on-ramp for compliant issuers, at least those operating under a centralized model. For such players, the SEC’s position could reduce legal uncertainty, streamline operations, and provide a meaningful alternative while Congress finalizes more comprehensive legislation.

But for decentralized issuers, especially DAOs and algorithmic models, the relief may be limited. The SEC’s guidance explicitly applies only to a narrow class of stablecoins that meet strict reserve and redemption criteria. Anything falling outside this definition remains in legal limbo, at risk of classification as an unregistered security, commodity, or worse.

In comparison, frameworks like MiCA in the EU and sandbox regimes in Switzerland appear more accommodating of decentralization. The U.S. approach may succeed in reinforcing monetary stability and consumer protection but at the potential cost of narrowing the scope of Web3 innovation.

So, the central question isn’t whether innovation can survive regulation, it’s whether regulation can evolve to protect consumers, preserve decentralization, composability, and openness. The April 2025 SEC statement marks progress but it also reminds us how far we still have to go.

The story is still being written. And for stablecoin issuers, the next chapter, now backed by both legislative movement and regulatory interpretation, has officially begun.

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