Crypto regulation in the world: weekly digest #141

USA

The U.S. SEC recently issued a statement clarifying its position on stablecoins, specifically those referred to as «Covered Stablecoins». These are fiat-backed digital tokens designed to maintain a one-to-one value with the U.S. dollar and backed by low-risk, liquid reserve assets.

The SEC concluded that Covered Stablecoins do not qualify as securities under federal law. Covered Stablecoins resemble instruments used for routine commercial transactions rather than speculative notes or debt securities. These tokens do not involve an investment in a common enterprise with an expectation of profit from the efforts of others, as they are marketed for payments and value storage rather than investment purposes.

To qualify as a Covered Stablecoin, issuers must adhere to strict requirements:

• Maintain fully backed reserves consisting of cash or liquid, low-risk assets like U.S. Treasury bills.

• Ensure these reserves are segregated and safeguarded from third-party claims.

• Offer redemption at a fixed price (one-to-one with USD) at any time and in unlimited quantities.

• Provide transparency through proof-of-reserve attestations.

The SEC emphasized that Covered Stablecoins do not provide any form of yield or profit-sharing to holders. While issuers may earn interest on reserve assets, these earnings cannot be distributed to token holders. This lack of financial benefit is a key factor in distinguishing Covered Stablecoins from securities.

The statement does not extend to algorithmic or uncollateralized stablecoins, which remain subject to further legal scrutiny.

Issuers of Covered Stablecoins are not required to register their offerings with the SEC, reducing regulatory burdens for compliant issuers. The statement aligns with broader legislative efforts in Congress to establish clear guidelines for stablecoin regulation, such as the proposed GENIUS Act.

Brazil

Brazil's Superior Court of Justice has issued a landmark ruling allowing the seizure of cryptocurrency assets for debt collection, marking a significant shift in the country’s legal treatment of digital assets. This decision, made by the court's Third Panel, enables judges to order cryptocurrency exchanges to freeze and report digital assets held by debtors who have failed to meet their financial obligations.

Cryptocurrencies are now treated similarly to conventional property, such as bank deposits or physical assets, in debt enforcement cases. Although not recognized as legal tender in Brazil, the court emphasized their utility as a store of value and a means of payment. Judges can notify cryptocurrency brokers directly to execute asset seizure orders without informing the debtor beforehand, aligning with existing practices for freezing bank accounts.

This decision is part of a broader trend toward integrating cryptocurrencies into Brazil’s financial and legal systems. Creditors now have an additional avenue for recovering debts by targeting crypto holdings, which were previously outside traditional banking systems.

Debtors must now consider the visibility and vulnerability of their crypto assets in legal contexts, as these holdings can be seized just like other forms of property. This ruling may influence other nations in Latin America and beyond as they develop frameworks for handling cryptocurrencies within legal systems.

South Korea

South Korea is actively considering opening its cryptocurrency market to foreign investors, marking a potential shift in its regulatory stance. Currently, foreign investors are barred from trading on South Korean crypto exchanges due to stringent KYC requirements and capital account restrictions. These regulations mandate that users link their exchange accounts to local bank accounts registered under their real names, effectively excluding non-residents.

The Financial Services Commission (FSC), South Korea's top financial regulatory body, has signaled that these restrictions could be eased if domestic exchanges demonstrate robust anti-money laundering compliance. Kim Sung-jin, head of the FSC’s virtual asset division, recently expressed support for allowing foreign investors access to the domestic crypto market during a seminar at the National Assembly. He emphasized the importance of attracting global capital while maintaining strong regulatory oversight.

Opening the market to foreign investors is expected to stimulate South Korea's crypto industry by increasing liquidity and global engagement. It could also drive growth in USD stablecoins within the region. The discrepancy between cryptocurrency prices on South Korean exchanges and international platforms, known as the «Kimchi Premium» might diminish as global liquidity flows into the market.

By revising AML regulations, South Korea aims to balance international investor interest with market security, positioning itself as a leading crypto hub aligned with global standards. The FSC is exploring strategies to attract international traders while ensuring compliance with enhanced AML measures. However, regulatory readiness remains a key hurdle, as exchanges must meet strict requirements before foreign participation can be allowed.

We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!