<\/p>\n
The recently reported staff guidance could let firms treat certain dollar-backed stablecoins like cash, deepening crypto\u2019s integration with TradFi.\n<\/p>\n
The U.S. Securities and Exchange Commission (SEC) issued guidance earlier this week stating that stablecoins<\/a> may be classified as cash equivalents under accounting standards, Bloomberg reported<\/a>. However, some experts argue the move could unintentionally stifle innovation.<\/p>\n According to the report from Bloomberg, the SEC\u2019s updated staff guidance suggests that stablecoins backed by U.S. dollars and offering guaranteed redemption \u2014 meaning they can be redeemed 1:1 for USD \u2014 could be treated as \u201ccash equivalents,\u201d placing them in the same category as dollars or short-term Treasury bills on a company\u2019s balance sheet.<\/p>\n That means companies could treat certain stablecoins, likely including Circle\u2019s USDC<\/a>, more like money, which could make it easier to use them in regular business. Moreover, the update could help pave the way for more traditional financial (TradFi) institutions to work with stablecoins, especially in areas like settlements and cross-border transactions. <\/p>\n \u201cThere’s no question that treating stablecoins as cash equivalents will be a major greenlight for DeFi to plug into the balance sheets of TradFi,\u201d Doug Colkitt, initial contributor to Layer 1 blockchain Fogo, told The Defiant. \u201cThis move could finally make it viable for serious institutions to hold and use stablecoins without jumping through flaming hoops.\u201d <\/p>\n However, Colkitt explained that there\u2019s a catch: \u201cIf the SEC\u2019s definition of \u2018guaranteed redemption\u2019 is too narrow, it could kneecap the more innovative yield-bearing models that make DeFi attractive in the first place.\u201d <\/p>\n He added that the digital asset space urgently needs programmable money that moves at internet speed and generates yield. \u201cThis guidance is a step forward, but whether it empowers real DeFi or just watered-down crypto remains to be seen,\u201d Colkitt said. <\/p>\n Kony Kwong, the CEO and co-founder of GAIB, echoed Colkitt\u2019s sentiment, noting that while this is positive overall, fiat-pegged tokens \u201cdon\u2019t offer underlying productivity, as the yield earned from the backing assets ends completely on the side of the issuer.\u201d<\/p>\n \u201cWhile treating them as cash might help with the normalization of crypto within financial systems, in a capital-efficient world, synthetic dollars backed by real economic activity will stand out by providing interest to their users,\u201d Kwong added. <\/p>\n This comes around a week after SEC Chairman Paul Atkins unveiled \u201cProject Crypto,\u201d<\/a> a new initiative designed to bring TradFi infrastructure in the U.S. on-chain, marking a major policy shift from previous SEC leadership.<\/p>\n Last month, the House of Representatives passed both the GENIUS and CLARITY Acts<\/a>, two key pieces of crypto legislation. Soon after, President Donald Trump signed<\/a> the stablecoin-focused GENIUS Act into law. Notably, the GENIUS Act is legislation dedicated to so-called \u201cpayment stablecoins,\u201d and specifically prohibits stablecoin issuers from paying out yield or interest to holders. <\/p>\nInnovation in Yield<\/h2>\n
Stablecoin Policy<\/h2>\n