Crypto Firm Figure Seeks SEC Nod For Interest-Bearing Stablecoins

Blockchain and lending startup Figure Technologies Inc., led by former SoFi Technologies Inc. CEO Mike Cagney, is aiming for approval from the U.S. SEC to launch interest-bearing stablecoins.

Figure Introduces Interest-Bearing Stablecoins

This unconventional move seeks to establish a new category of stablecoins with federal legitimacy. If successful, Figure will introduce the first stablecoin regulated as a security in the U.S. The company filed a draft registration statement with the Securities and Exchange Commission (SEC) in October under its subsidiary, Figure Certificate Co.

The filing reveals Figure’s intent to register the stablecoin as “face-amount certificates,” a form of fixed-income securities, utilizing blockchain technology. Upon approval, the stablecoin will be accessible to both U.S. retail and institutional investors.

Figure has unveiled interest-bearing stablecoins, a financial product that has gained popularity outside the United States. However, concerns over potential SEC regulation have led many issuers to avoid offering such products within the US market.

Unlike traditional stablecoins pegged at a fixed value of $1, Figure’s offerings come with a unique twist. Each certificate is redeemable at 1 cent, requiring the transfer of 100 certificates for a $1 payment. The interest on these stablecoins will accrue daily and be distributed monthly to the holders, as outlined in the filing.

The source of the interest will be the reserves, encompassing various assets such as treasury holdings, commercial paper, corporate debt, among others, as detailed in the filing. To acquire these interest-bearing stablecoins, holders must undergo a know-your-customer (KYC) process during the sign-up procedure.

Figure anticipates that its offering will serve as a substitute for current stablecoins in payments and transaction settlements, as indicated by the filing. It will also attract buyers to an instrument that offers yield supported by highly liquid, investment-grade assets. The filing further adds that buyers can hold these assets digitally and quickly liquidate them in peer-to-peer transactions.

The U.S. Regulatory Landscape

The stablecoin market, consisting of tokens tied to assets like the US dollar, is currently led by Tether Holdings Ltd.’s USDT, boasting $95 billion in circulation, followed by Circle Internet Financial’s USD Coin. These stablecoins do not offer interest and are primarily utilized by crypto traders for transaction settlements or asset transfers between exchanges.

While Figure’s application for approval is uncertain, the process is expected to fuel discussions on how stablecoins should be regulated in the US. Despite previous unsuccessful attempts by US lawmakers to propose bills on stablecoins, President Joe Biden has prioritized oversight of the sector. Circle, which recently confidentially filed plans for an initial public offering, is part of this regulatory landscape.

Figure is also submitting a filing to register an offering designed for investment purposes, known as Figure Installment Certificates. This offering targets investors seeking to earn yields while holding assets in a digital format, as outlined in the filing.