Stablecoin Regulation and SEC Enforcement.

In most cases, yes. This is true both as a matter of existing legal obligations and as a practical matter. Even in the near future, substantial compliance requirements will present substantial burdens for businesses offering (and banks offering custody services for) stablecoins.

Do Stablecoin Businesses Have to Worry About More Than Just the SEC?

Yes. While the SEC is certainly on the stablecoin beat, businesses offering stablecoins must also comply with applicable FinCEN (AML/KYC) and OFAC sanctions rules. The proposed (and in some cases, already effective) regulatory regime for stablecoins extends far beyond securities laws.

Is the G.E.N.I.U.S. Act the End of the Story?

While the G.E.N.I.U.S. Act became law on July 18, 2025, there are multiple reasons why this was not the end of the story:

(i) The G.E.N.I.U.S. Act addresses only a narrow swath of stablecoin activity.

(ii) Much of the substantive provisions of the G.E.N.I.U.S. Act relate to the CLARITY Act. While the CLARITY Act has been delayed by Congress, in the meantime, the G.E.N.I.U.S. Act’s provisions relating to CLARITY do not suspend a stablecoin issuer’s obligations under currently effective law.

(iii) The SEC’s authority is not limited to the stablecoin-specific provisions enacted by Congress.

What are Tokenized Bank Deposits?

Tokenized bank deposits represent deposit claims against issuing banks. As these claims are transferred on a DLT-based ledger system, they are expressly excluded from the G.E.N.I.U.S. Act’s definition of “payment stablecoin.”

What are Algorithmic Stablecoins?

Algorithmic stablecoins are stablecoins that use stabilization mechanisms (e.g. through algorithmic balancing of issuance and redemption) rather than relying on complete reserve backing. While the G.E.N.I.U.S. Act addresses “reserve-backed” stablecoins, the SEC’s enforcement authority extends to algorithmic stablecoins as well.

Which Types of Stablecoins Might Still Be Treated as Securities?

If a stablecoin issuer markets its crypto asset as an investment, this will prompt SEC scrutiny under the Howey test. To satisfy the test and establish that the asset is an “investment contract” (and thus a security), the SEC will need to show (i) an investment of money, (ii) in a common enterprise, (iii) with an expectation of profits, and (iv) derived from the entrepreneurial or managerial efforts of another. The Howey analysis turns on economic reality. The fact that an asset is a stablecoin, or has a price peg, does not foreclose the possibility that it is an investment contract under Howey. The elements of an investment contract under Howey are all potentially satisfied in stablecoin transactions:

• Investment of Money: While Howey is typically applied to transactions involving US dollars, the SEC has already begun asserting that “money” includes other forms of investment capital, such as other crypto assets.
• Common Enterprise: Stablecoin issuance constitutes a common enterprise. As issuers hold reserves for redemption of stablecoin tokens, the success of the stablecoin is tied to the issuer’s ability to manage the reserves and meet demand.
• Expectation of Profits: While stablecoin issuance is not, in and of itself, likely to satisfy this element, many stablecoin issuers promote yield opportunities. Promised yield, through staking, lending, or other programs, can support both Howey’s expectation-of-profits and managerial-efforts elements.
• Managerial Efforts: Again, while managing stablecoin reserves is not likely, on its own, to satisfy this element, the SEC may be able to show that the promised yield depends on the issuers’ entrepreneurial efforts to maximize profits.

How Does the G.E.N.I.U.S. Act Affect the SEC’s Stablecoin Enforcement Authority?

As a practical matter, the G.E.N.I.U.S. Act does not impact the SEC’s enforcement authority in practice, at least not yet. To the extent it does impact the SEC’s enforcement authority, the effect should be minimal.

The G.E.N.I.U.S. Act explicitly excludes “permitted payment stablecoins” and “authorized stablecoin issuers” from the definition of “security” and “security issuer”, respectively. However, the G.E.N.I.U.S. Act provides:

The definition of “security” under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) is amended to exclude any payment stablecoin issued by a permitted payment stablecoin issuer.

A “permitted payment stablecoin” is a payment stablecoin that is issued pursuant to a “stablecoin certificate” or under “permitted stablecoin issuer” status. The federal securities laws continue to apply where other stablecoins or transactions satisfy applicable securities-law definitions. Thus, to the extent they meet the requirements of an investment contract under the Howey analysis, the SEC still has authority to seek enforcement for issuance of algorithmic stablecoins, as well as for “permitted payment stablecoins” and other “stablecoins” before the expiration of an applicable stablecoin certificate, while pending a stablecoin certificate application, or while pending a permissible stablecoin issuer application.

What Does this Mean for Stablecoin Businesses?

The takeaways for stablecoin businesses are:

1. Stablecoin businesses cannot assume that they are in the “safe harbor” created by the G.E.N.I.U.S. Act. To operate within the safe harbor, they need to pursue registration and licensing with the appropriate authorities.

2. Stablecoin businesses must be prepared for enforcement action not only from the SEC, but also from FinCEN and OFAC.

3. Stablecoin businesses must be prepared for enforcement action based on Howey analyses.

4. Stablecoin businesses must be prepared for litigation under the securities laws.

What Reserve and Redemption Rules Apply to Stablecoins Now (and in the Near Future)?

For “permitted payment stablecoins,” the G.E.N.I.U.S. Act generally imposes rules that resemble the requirements that banks face for deposits. Specifically:

• Reserves: To be a permitted payment stablecoin, “the stablecoin must be fully reserved at all times, such that each issued unit of the stablecoin is fully backed by US dollars or other cash equivalents... or other qualifying assets.”
• Disclosures: “An authorized stablecoin issuer... shall publish on a monthly basis information that adequately describes the composition and current value of its stablecoin reserve.”
• Redemption: “An authorized stablecoin issuer... shall publish on its official website... the policies and procedures for redemption of the payment stablecoin.”

However, the definition of “payment stablecoin” explicitly excludes any form of stablecoin that “represents an obligation of a regulated depository institution payable in US dollars on demand... that represents a deposit deposit account or other deposit claim.”

Accordingly, if a stablecoin takes the form of a tokenized bank deposit (as discussed below), the G.E.N.I.U.S. Act will not impose the reserve, disclosure, and redemption requirements of the act to that extent.

What Other Stablecoin Reserve and Redemption Rules Exist?

Apart from those adopted under the G.E.N.I.U.S. Act, the reserve and redemption requirements that apply to (and that may apply to) stablecoins continue to be limited in scope. That said, the NYDFS has issued guidance that imposes several reserve and redemption requirements in respect of “regulated dollar stablecoins.” Under NYDFS guidance, regulated dollar stablecoins must:

• Reserves: Have reserves that “at all times equal the value of outstanding units of the regulated dollar stablecoin.”
• Redemption: As a general matter, allow for “redemption of the regulated dollar stablecoin for US dollars at par (i.e., the amount of the stablecoin’s units multiplied by the stablecoin’s value) within two (2) full business days of the delivery of the redemption request.”
• Disclosures: “Publish on its official website a summary of its policies and procedures for allowing redemption of the regulated dollar stablecoin.”
• Attestation: “Publish on its official website a monthly independent attestation in connection with the stablecoin’s reserve, prepared in accordance with the provisions of this section and the accompanying guidance on reserve requirements.”

Do Pending Stablecoin Bills and Proposals Apply Already?

FinCEN and OFAC have made stability-coin-specific regulatory proposals. This includes:

• Customer Identification Rules (FinCEN): On June 18, 2026, FinCEN proposed a customer-identification regime applicable to permitted payment stablecoin issuers. FinCEN is currently seeking public comment on this proposed rule.
• AML, KYC, and Sanctions Rules (FinCEN and OFAC): FinCEN and OFAC issued a joint proposal on April 8, 2026, for permitted-payment-stablecoin-issuer anti-money-laundering and sanctions-compliance requirements. Another development of particular importance is the proposed (but still-delayed) CLARITY Act. In May 2026, the Senate Banking Committee released revised text for the act and promptly scheduled a markup of the bill. Despite these steps, as of July 16, 2026, the act remained pending in Congress. This raises a fundamental question: to what extent must stablecoin issuers and other businesses be concerned with the implications of pending legislation, proposed agency rules, and other pending regulatory developments?

Generally speaking, pending bills and proposed agency rules do not have any immediate legal effect. Specifically, (i) pending bills impose no compliance obligations prior to enactment and effectiveness; (ii) proposed agency rules are not binding until they are finalized and effective; and (iii) pending amendments and other proposed revisions to regulatory frameworks also have no immediate legal effect. This means that the customer-identification and AML/KYC requirements proposed by FinCEN and OFAC, as well as the statutory provisions of the pending CLARITY Act, are not yet binding. That said, these developments can still present significant risks for stablecoin issuers and other affected businesses. As a result, tracking proposed rules and legislation in the crypto space can be critical for both strategic and compliance purposes. For a comprehensive overview of current and proposed rules, we encourage you to consult our legal blog.

We can assist stablecoin issuers, banks, and other businesses with compliance, transaction structuring, regulatory inquiries, and defense representation in connection with the current and proposed regulations described above.

Our attorneys are available to discuss these (and other) issues over the phone or in person, at our offices in Washington, D.C., or via Zoom. You can contact Spodek Law Group by calling 202-981-7700, or you can fill out our online contact form to have an attorney call you. Todd Spodek and the attorneys at Spodek Law Group handle federal cases of this kind from New York, Brooklyn, Queens and Los Angeles.

Which Regulators Oversee Stablecoin Businesses Right Now?

Currently, stablecoin businesses and banks offering stablecoin services may be subject to oversight and enforcement action by numerous federal and state agencies. These agencies include:

• The SEC and CFTC: While both the SEC and CFTC are taking steps to expand their stablecoin oversight efforts, they have also taken steps to improve their interagency coordination to date. In March 2026, the two regulators entered into a Memorandum of Understanding to facilitate ongoing coordination and information-sharing, including with respect to stablecoin enforcement.
• FinCEN: FinCEN administers the customer-identification, anti-money laundering, know-your-customer, and other obligations under the Bank Secrecy Act that apply to stablecoin businesses.
• OFAC: OFAC administers sanctions restrictions and reporting obligations applicable to stablecoin issuers, holders, and other participants involved in stablecoin transactions.
• State Agencies: To the extent that they are required to register or otherwise license in the United States, stablecoin issuers and other businesses also face oversight from state-level agencies. This includes (i) the money transmission-regulation activity of various states’ banking departments and offices of financial regulation, and (ii) the regulation of state-chartered stablecoin issuers by agencies such as the New York State Department of Financial Services (NYDFS).
• Federal Banking Regulators: While stablecoin issuance and redemption are generally considered off-bank activities, they may also be subject to oversight from the federal banking regulators that supervise regulated depository institutions (banks) that hold reserve assets and other accounts for stablecoin issuers.

What Other Regulatory Initiatives are underway?

In addition to regulating stablecoin transactions and stablecoin businesses, the SEC, CFTC, FinCEN, OFAC, and other regulators have also implemented a range of broader crypto-related initiatives and enforcement programs. These include:

• The SEC’s New Crypto Task Force: In January 2025, the SEC announced the launch of a new Crypto Task Force.
• Qualified Client Threshold: In June 2026, the SEC increased the threshold for “qualified clients” under Rule 205-3 of the Investment Advisers Act of 1940.
• The SEC’s 2026-2030 Strategic Plan: In June 2026, the SEC published a draft 2026-2030 strategic plan for public comment. As described below, the plan focuses extensively on “enhancing market efficiency and transparency” and protecting crypto investors.

What Happens When an SEC Stablecoin Investigation Begins?

If the SEC opens an investigation into your stablecoin issuance or other activity, the process typically unfolds as follows:

• Document Requests, Interviews, and Testimony. The SEC will request information, interviews, and sworn testimony. We can assist you with responding to these requests and with other substantive aspects of the SEC’s information-gathering process.
• The Wells Process. After the investigation concludes, the SEC’s Division of Enforcement staff will determine whether to recommend an enforcement action to the Commission. If so, you will have the opportunity to submit a “Wells submission” advocating that you do not deserve an enforcement action based on the evidence gathered to date.
• The Wells Notice. A “Wells Notice” is an official communication from the SEC stating that the staff intends to recommend an enforcement action. The issuance of a Wells Notice does not mean the SEC has filed charges, and the SEC will not file charges against an issuer who makes a successful Wells submission.
• Parallel Civil and Criminal Investigations. The SEC frequently coordinates with other federal authorities during civil investigations. Notably, the SEC’s stablecoin-related enforcement may be parallel to DOJ-led investigations into the same transactions or activity.

What Types of Charges Can Stablecoin Issuers Face?

We represent clients in SEC enforcement actions, including (i) securities-related offenses, (ii) commodities and foreign exchange offenses, (iii) fraud, (iv) insider trading, (v) insider securities-transaction offenses, and (vi) broker-dealer offenses. We also represent clients in SEC-related matters that have implications for their future dealings with the SEC. This includes helping clients to avoid SEC actions by improving their compliance programs, avoiding registration deficiencies, and addressing issues with investors, customers, and other stakeholders.

Can the SEC Stop a Stablecoin Issuer’s Operations Right Away?

The SEC has the power to seek a temporary restraining order, the appointment of a receiver, an asset freeze, and other emergency remedies during stablecoin investigations. While there are substantial procedural protections in place, the issuance of an injunction can freeze stablecoin issuance and redemption on a temporary basis.

Can the SEC Seek Enforcement through the Courts and Administratively?

The SEC has the authority to file civil charges in federal district court, or seek administrative enforcement. Generally, SEC enforcement action in the federal district court includes claims under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and the Investment Company Act of 1940. Enforcement in the SEC’s administrative proceedings includes claims for violations of the Exchange Act and other securities laws as well.

Can an SEC Examination Lead to an Enforcement Action?

An SEC examination can escalate into an enforcement action if the SEC’s Division of Examinations uncovers issues that are too significant to be handled during the examination process. We can help you address issues that are uncovered during the SEC’s examination process and we can also assist you if you face additional scrutiny from the SEC’s Division of Enforcement after an SEC examination.

What are the Consequences of an SEC Stablecoin Enforcement Action?

An SEC stablecoin enforcement action can have significant consequences beyond the possibility of paying fines and forfeiting profits. This includes (i) loss of insurance coverage, (ii) loss of stablecoin licenses, (iii) debarment from participating in federal securities markets, (iv) loss of customers, (v) loss of access to capital markets, and (vi) loss of reputation.

Who Pays When Executives Need Separate SEC Defense Lawyers?

Under the American Bar Association’s Model Rule 1.13, counsel representing a company or other entity represents the entity itself. As a result, when a company’s counsel represents a company’s executives as well, it does so in that capacity. While Model Rule 1.13 allows for this type of dual representation, this representation must also comply with Model Rule 1.7, which governs concurrent conflicts. If a company’s counsel cannot comply with both rules, or if the lawyer needs to withdraw from representation for other reasons, then the company and its executives must pursue separate defenses in their respective SEC investigations. This will be the case if, for example, the company and its executives are not equally situated in an SEC investigation, or if they need to assert diverging defenses. In most cases, if an executive is required to hire separate counsel in an SEC investigation, his or her company is required to pay for his or her legal fees. In most cases, a company’s bylaws and other corporate governing documents will incorporate the indemnification and advancement provisions of Delaware General Corporation Law Section 145. Under Section 145, “a corporation has the power” to “indemnify any of its directors or officers” for expenses, liabilities, and settlements “actually and reasonably incurred.” This is the standard in most U.S. jurisdictions, and it typically applies whether the targeted individual is a director or officer (and whether they are involved in stablecoin issuance or not). Along with indemnification and advancement provisions under state law and the company’s bylaws and charter, stablecoin issuers should also consider their directors and officers (D&O) insurance coverage. The scope and applicability of D&O insurance depends on the specific terms and conditions of the insurance policy at issue. Relevant policy provisions include:

• Exclusions (i.e., exclusions relating to “securities law violations” or other specific offenses);
• Retention provisions (i.e., any amount the insured party must pay out-of-pocket before the insurance company will indemnify it);
• Payment advancement provisions (i.e., any provisions requiring the insurance company to advance legal defense costs and other fees to the insured party); and,
• Other provisions concerning the insurer’s obligations and the duration of coverage.

Talk to Spodek Law Group

Every case turns on its own facts, and general information is no substitute for advice about yours. Todd Spodek, managing partner of Spodek Law Group, and the firm's attorneys defend federal criminal and white collar matters nationwide. Reach the firm at 212-300-5196.