What Is a Covered Stablecoin and Why Does USDT Not Qualify?

Bittime - Hi, fellow Bittimers! Surely you have often heard about this stablecoin, right? But recently, there is a new term that is being hotly discussed: covered stablecoin or covered stablecoin.

What does this term actually mean? And why doesn't Tether (USDT), the king of stablecoins, even qualify as a covered stablecoin? Come on, let's discuss it together!

What Is Covered Stablecoins?

Covered stablecoins are a type of stablecoin that according to the latest guidance from the SEC are not considered securities (securities), as long as it meets strict requirements. This means that they are not investment instruments, but rather stable and easy-to-use means of exchange or digital stores of value.

The following are the conditions for a stablecoin to be called a covered stablecoin:

• Must 100% backed by US dollars (1:1)
  
   
• The reserve fund must be: liquid and low-risk assets, such as cash or government debt securities (U.S. Treasuries)
  
   
• Must be able to redeemed at any time with full marks
  
   
• Can't promising interest, profits, voting rights, or ownership
  
   

In other words, covered stablecoins are like “digital dollars” — practical, stable, and not for speculation.

Why Does USDT Not Meet the Conditions of a Covered Stablecoin?

USDT is indeed very popular and widely used throughout the world. But unfortunately, USDT does not meet the criteria as a covered stablecoin under SEC guidelines.

Why? Due to USDT reserves does not consist entirely of cash or U.S. Treasuries. Some of the supporting assets include gold and Bitcoin, which the SEC says is a high-risk and insufficiently liquid asset. This makes USDT unable to fall into the covered stablecoin category.

Tether U-turns and Sets Up New Stablecoin

Tether is not standing still. They are reportedly preparing a stablecoin new fully compliant with US regulations. The stablecoin will only be backed by cash and US government debt.

This means that in the future there will most likely be two stablecoins from Tether:

1. USDT → Focus on global markets and emerging countries
   
    
2. New stablecoin → Intended specifically for the United States market
   
    

This move shows Tether's adaptation to an increasingly clear and stringent regulatory landscape.

The Future of Stablecoins: Bright But Full of Challenges?

Although this new rule has its pros and cons, many parties welcome the clarity provided by the SEC. This could pave the way for the healthy and law-abiding growth of stablecoins.

The volume of stablecoin usage also continues to increase. In the first quarter of this year alone, the stablecoin market grew by more than $30 billion (equivalent to IDR 495 trillion at an exchange rate of IDR 16,500 per dollar). However, challenges remain, ranging from reserve transparency, regular audits, to public trust.

Conclusion

Covered stablecoins bring a breath of fresh air to the crypto world as they provide the needed legal certainty. But not all stablecoins can immediately fall into this category.

Tether with its USDT will have to make major adjustments if it wants to access the American market. With demand for stablecoins remaining high, the future of covered stablecoins is still very promising, as long as players can comply with the applicable rules of the game.

FAQ Covered Stablecoin

1. Are Covered stablecoins legal in the US?

Yes, covered stablecoins are considered legal as long as they meet the requirements set by the SEC. Because it is not categorized as a security, this stablecoin is not required to register as an investment product, as long as it is only used as a medium of exchange or store of value.

2. Why is USDT not a Covered Stablecoin?

USDT is not fully backed by low-risk liquid assets such as cash and U.S. Treasuries. The use of Bitcoin and gold as reserves makes it fail to qualify as a covered stablecoin according to the SEC.

3. Should USDT users be worried?

There's no need to panic, but it's important to be aware that regulations in America could impact USDT usage in the region. Tether itself is preparing a new compliant stablecoin, specifically for the US market.

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References

crypto news, Coinspedia.org, accessed April 6, 2025

crypto news, CoinStats..app, accessed April 6, 2025

Author: Fkey