On February 17, 2026, the U.S. Securities and Exchange Commission (SEC) received a noteworthy technical document. This 186-page report titled “Bank Deposit Stability and Stablecoin Yields: Regulatory Safe Design Patterns and Evidence Components” contains a detailed operational framework for classifying and regulating stablecoins and yield-bearing digital assets.
The document was submitted to the SEC’s Crypto Assets Working Group as a follow-up to the previously submitted FCCK pilot framework. Although it describes itself as a “non-binding implementation guide” rather than a policy proposal, its detailed and systematic content closely resembles a regulatory blueprint.
Amid South Korea’s preparations for the second phase of legislation—regulating stablecoins and token securities—following the implementation of the “Virtual Asset User Protection Act,” this article outlines the insights brought by this document.
Core 1: Three-tier Classification System for Stablecoins—“Payment, Investment, or Reward?”
The key recommendation in the document is to clearly categorize stablecoin-related products into three types.
Category 1 (Payment Type): Stablecoins that solely perform pure payment and settlement functions. The yields generated by reserve assets are retained by the issuer, and holders do not earn any returns. Currently, USDT and USDC are basic examples of this category.
Category 2 (Yield Type): Independent financial products that offer interest or yields to holders. They must be separated from payment stablecoins in legal, operational, and disclosure aspects, and structured as voluntary participation options for holders. Revenue sources include reserve asset yields, loan interest, etc.
Category 3 (Reward Type): Products that provide indirect benefits (cashback, points, discounts, etc.) through third-party partners or affiliates. Since their revenue sources are external, they are distinguished from Category 2.
This classification system is important because each category entails different disclosure obligations, reserve proof requirements, stress testing, and audit standards. The document even provides a “boundary test” table to determine when a conversion occurs between categories. For example, when the reserve yield of a payment stablecoin begins to be distributed to holders, it shifts from Category 1 to Category 2, triggering additional regulatory obligations.
Implication for Korea: The most likely point of controversy in Korea’s upcoming stablecoin regulation is this issue—whether payment stablecoins should be allowed to offer yields. If permitted, where does “payment” end and “investment product” begin? The three-tier classification system in this document offers a model that Korea’s regulators can directly reference.
Core 2: ‘Evidence Pack’—Design of Real-Time Audit Infrastructure
The most practical part of the document is the standardized audit documentation system called the “Evidence Pack.” It specifies in detail the list of proof materials, formats, and hash verification methods that issuers must prepare and maintain in advance to respond to regulatory inspections.
The Evidence Pack includes reserve proof, yield distribution details, redemption logs, concentration reports, and more. All records must be managed via “immutable logs” to prevent tampering afterward. It recommends verifying log integrity through SHA-256 hash chains and conducting quarterly drills to assemble Evidence Packs.
Particularly noteworthy is the concept of “Inspector Query Pack,” which aims to provide pre-standardized SQL queries enabling regulators to directly query issuer data without technical friction. Examples include verifying whether “reserves and yield plan funds are mixed” and “what is the concentration of the top 10 holders.”
Implication for Korea: While Korea’s Virtual Asset Business Inspection System is based on the “Virtual Asset User Protection Act,” specific standards for examining stablecoin issuers have yet to be established. This Evidence Pack system offers concrete answers on “what forms and how frequently to submit what data.” The use of blockchain’s immutable logs and hash chain verification demonstrates a fundamentally different regulatory approach from traditional financial institution inspections.
Core 3: Handling Bank Run Scenarios—‘Liquidity Gates’ and ‘Flow Control’ Mechanisms
A significant portion of the document discusses stress scenarios, specifically how to respond to digital bank runs. Given that redemption requests in a digital environment could flood in within minutes—unlike traditional bank runs—a tiered response system is designed.
If 15-25% of the outstanding balance is requested for redemption within 24 hours, an “Orange Alert” triggers a “flow control” mechanism to slow processing. If over 25%, a “Red Alert” activates, temporarily shutting the redemption “gate.” The gate can be maintained for up to 7 days, with extensions requiring regulatory approval.
The document even details practical stress scenarios, such as “a Fed rate shock causing volatility in the Treasury market, with three institutional investors requesting redemption of 25% of total supply within 2 hours,” and provides a checklist of response procedures.
Implication for Korea: The Terra Luna incident in 2022 exemplifies a stablecoin bank run originating in Korea. At that time, Korean regulators lacked an effective response system and could only observe. The liquidity gate and flow control mechanisms in this document offer concrete models for managing redemption risks in algorithmic or fiat-collateralized stablecoins.
Core 4: Concentration Risk Monitoring—Issues with Major Holders
The document dedicates a chapter to “concentration risk,” warning of systemic risks when a few large holders control a significant portion of the total supply.
If the top 10 holders hold more than 40% of the outstanding amount, a “Yellow Alert” is triggered for enhanced monitoring; if the Herfindahl-Hirschman Index exceeds 2500, an alert is also issued. Weekly concentration measurements and proactive communication with large holders are recommended.
Implication for Korea: The Korean virtual asset market is characterized by liquidity concentrated in a few major exchanges. If a Korean-won-pegged stablecoin is issued, it’s foreseeable that certain exchanges or institutions could hold large amounts. Monitoring standards and alert systems for concentration risk are essential elements in Korea’s stablecoin regulation.
Core 5: “Do Not Apply Existing Regulations to New Technologies”
The fundamental message of the document is that existing securities laws or banking laws should not be directly applied to digital assets. Instead, regulators should develop new tools and classification systems suited to emerging technologies.
While recognizing the limitations of the Howey test in determining whether an asset is a security, the document proposes practical “boundary tests.” Increasing transparency in enforcement and balancing innovation with investor protection are core themes.
The authors explicitly state: “This framework does not specify whether particular functions are permitted or prohibited. That is the responsibility of regulators. We only provide tools aimed at reducing regulatory friction and supporting controlled pilots.”
Implication for Korea: Korea’s financial authorities are currently regulating digital assets within the existing legal frameworks of the Capital Markets Act and Electronic Financial Transactions Act. However, when stablecoins combine complex payment, yield, and reward functions, they may not fit neatly into any existing law. This document demonstrates an approach of “creating new provisions while enhancing regulatory effectiveness.”
The Next 12–24 Months Will Decide the Next Decade of Digital Finance
While this framework is unlikely to be immediately adopted as formal SEC regulation, the fact that detailed technical discussions on stablecoin and digital asset regulation are now concrete is significant.
Korea, having advanced ahead in the global regulatory race through the implementation of the “Virtual Asset User Protection Act” in 2024, has yet to finalize its second-phase legislation. As the U.S. discusses classification systems—“Payment vs. Yield vs. Reward”—and real-time audit infrastructure, Korean regulators are at a critical juncture to move beyond mere discussions of “permissibility” and toward “how to regulate” these technologies.
Regulatory clarity will not hinder innovation; rather, it will accelerate institutional investor participation. Over the next 12–24 months, the regulatory directions chosen by major jurisdictions will shape the next decade of digital finance.
