How Does a Stablecoin’s Reserve Composition Affect Its Regulatory Classification?

The composition of a stablecoin's reserves is a key factor in its regulatory classification. If the reserves consist primarily of short-term, highly liquid assets like cash and Treasury bills, it is often viewed as a "payment stablecoin" or a "utility token." However, if the reserves include riskier assets like corporate bonds or equity, the stablecoin may be classified as a "security" or an "investment contract" by regulators, subjecting it to much stricter securities laws and registration requirements.