Former SoFi Technologies Inc. CEO Mike Cagney leads the blockchain and lending startup Figure Technologies Inc. in their pursuit of approval from the U.S. Securities and Exchange Commission (SEC) to launch interest-bearing stablecoins. This innovative move aims to establish a new category of stablecoins with federal legitimacy. If successful, Figure will be the first company to introduce a stablecoin regulated as a security in the U.S. In October, the company filed a draft registration statement with the SEC through its subsidiary, Figure Certificate Co.
Figure’s filing reveals their plan to register the stablecoin as “face-amount certificates” – a form of fixed-income securities – utilizing blockchain technology. Once approved, this stablecoin will be available to both U.S. retail and institutional investors.
The introduction of interest-bearing stablecoins is 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 U.S. market.
Unlike traditional stablecoins that are 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. 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, consisting of various assets such as treasury holdings, commercial paper, and corporate debt, 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. Buyers can hold these assets digitally and quickly liquidate them in peer-to-peer transactions.
The stablecoin market, which includes tokens tied to assets like the US dollar, is currently dominated by Tether Holdings Ltd.’s USDT, with $95 billion in circulation, followed by Circle Internet Financial’s USD Coin. These stablecoins do not offer interest and are primarily used by crypto traders for transaction settlements or asset transfers between exchanges.
While Figure’s application for approval is uncertain, the process is expected to spark discussions on how stablecoins should be regulated in the U.S. 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.