Under new SEC guidelines, stablecoins that meet certain criteria are considered ”non-securities” and are exempt from transaction reporting requirements, the United States Securities and Exchange Commission said in a notice published April 4.

“Covered stablecoins,” as the SEC classifies them, are fully backed by physical fiat reserves or short-term, low-risk, highly liquid instruments and are redeemable at a 1:1 ratio with US dollars.

The definition precludes algorithmic stablecoins that maintain their US dollar peg using software or an automated trading strategy, leaving the regulatory status of algorithmic stablecoins, synthetic dollars, and yield-bearing fiat tokens uncertain.

Industry leaders and executives are pushing for regulatory changes that would allow stablecoin issuers to share yield opportunities with stablecoin holders and offer onchain interest.

According to the new guidelines, covered stablecoin issuers cannot co-mingle asset reserves with operational capital or offer token holders interest, profit, or yield opportunities. Additionally, the covered stablecoin issuers must never use their reserves for investing or market speculation.

Related: Stablecoin supply surges $30B in Q1 as investors hedge against volatility

SEC’s definition of “covered stablecoin” consistent with broader US policy objectives

The SEC’s criteria for covered stablecoins are consistent with regulations stipulated in the GENIUS stablecoin bill, introduced by Senator Bill Hagerty, and the Stable Act of 2025, introduced by Representative French Hill.

The proposed legislation aims to protect the status of the US dollar as the global reserve currency through stablecoins that are backed by US dollars and government securities.

Centralized stablecoin issuers back their tokens with US dollar deposits held in regulated financial institutions and short-term US Treasury Bills, driving demand for US dollars and US government debt.

Tether, the world’s largest stablecoin issuer, is now the seventh-largest holder of US Treasuries, beating out countries like Canada, Germany, and South Korea.

Speaking at the first White House Digital Asset Summit on March 7, US Treasury Secretary Scott Bessent said the US would use stablecoins to extend US dollar dominance.

Bessent said that regulating stablecoins was central to the administration’s digital asset strategy and a top regulatory priority during the current legislative session.

Magazine: Bitcoin payments are being undermined by centralized stablecoins

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PayPal announced plans to allow US users to buy, sell, and transfer Solana (SOL) and Chainlink (LINK) through its core platform and Venmo, marking the latest expansion in the payments giant’s crypto offerings. The rollout, set to take place in the coming weeks, will increase PayPal’s supported digital assets to seven and respond to growing […]

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Following legal restrictions, Genius Group begins downsizing and liquidating part of its Bitcoin Treasury to support ongoing operations. …

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In its latest what’s-not-a-security statement on digital assets, the Securities and Exchange Commission has added dollar-based stablecoins, but may snub Tether. …

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Bitcoin (BTC) outperformed most major tech stocks on April 3 and April 4 as markets reeled from steep losses across the so-called “Magnificent Seven” (MAG7). Standard Chartered head of digital asset research Geoffrey Kendrick said Bitcoin’s relative resilience signals a growing role as a dual-purpose asset — part growth trade, part hedge against macro risks. […]

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First Trust Advisors has launched two Bitcoin (BTC) strategy exchange-traded funds (ETFs) designed to provide investors with Bitcoin exposure while capping losses and earning yield, the asset manager said. 

The move comes amid an outpouring of funds seeking to enhance Bitcoin’s appeal to traditional investors by offering tailored exposure to the cryptocurrency’s performance.

The FT Vest Bitcoin Strategy Floor15 ETF (BFAP) is designed to track Bitcoin’s performance up to a capped upside while limiting drawdown risk to approximately 15%, First Trust said in an announcement.

“Over the past few years, investors have shown a remarkably strong appetite for bitcoin-linked ETFs, but the potential for sharp drawdowns has kept many on the sidelines,” Ryan Issakainen, an ETF strategist at First Trust, said in a statement.

The FT Vest Bitcoin Strategy & Target Income ETF (DFII) is an actively managed fund aiming to offer partial Bitcoin exposure while generating a yield that beats short-dated US Treasurys by at least 15%, according to the asset manager. 

The DFII fund “will seek to take advantage of bitcoin’s high volatility to generate income by selling call options,” Issakainen said. The BFAP fund also uses financial derivatives to hedge downside risk. 

Options are contracts granting the right to buy or sell — “call” or “put,” in trader parlance — an underlying asset at a certain price.

Related: Trump-linked Strive files for ‘Bitcoin Bond’ ETF

Structured Bitcoin funds

Launched in January 2024, Bitcoin ETFs emerged as one of last year’s hottest investment products. 

As of April 4, spot BTC ETFs collectively manage approximately $93 billion in assets, according to data from Bitbo. 

Other types of ETFs designed to offer tailored exposure to Bitcoin’s performance are also gaining popularity. 

On April 2, Grayscale — a cryptocurrency-focused asset manager — launched two Bitcoin strategy ETFs. Like First Trust’s ETFs, they use financial derivatives to optimize for downside risk management and income generation. 

In March, asset manager Bitwise launched an ETF holding stocks of companies with large Bitcoin treasuries. 

Spot BTC ETFs saw nearly $100 million in outflows on April 3 amid the heightened market volatility following US President Donald Trump’s tariff announcement of sweeping tariffs on April 2. 

Magazine: Bitcoin ATH sooner than expected? XRP may drop 40%, and more: Hodler’s Digest, March 23 – 29

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Grayscale has taken the next step in its efforts to launch a spot Solana exchange-traded fund (ETF). On April 4, the digital asset manager filed a Form S-1 with the US Securities and Exchange Commission (SEC), aiming to convert its existing Grayscale Solana Trust (GSOL) into a publicly traded ETF. Crypto traders on the decentralized […]

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Technical issues on Holesky and Sepolia testnets forced developers to postpone Pectra, but successful Hoodi tests cleared the path forward. …

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Federal Reserve Chair Jerome Powell warned on April 4 that President Donald Trump’s newly announced tariffs are likely to elevate inflation and slow economic growth. However, he also signaled that the central bank would hold off on any interest rate moves until the effects are clearer. According to Powell: “It is too soon to say […]

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