The phrase "regulated stablecoin" usually means a token whose issuer holds state money transmitter licenses and publishes monthly attestations. USDC, USDT, PYUSD, and most of the dollar stablecoin float fit that mold. YLDS, issued by Figure Certificate Company and live since February 2025 on Provenance Blockchain, is the only dollar token currently active that takes a different route: it is registered with the U.S. Securities and Exchange Commission as a face-amount certificate. YLDS expanded to Solana in November 2025 and to Stellar on May 5, 2026. That single legal distinction reshapes how holders are protected, what disclosures the issuer must publish, and why almost no other dollar token has tried this structure in the modern stablecoin era.
This article explains what a face-amount certificate is under the Investment Company Act of 1940, what rights it gives holders compared with USDC or USDT, and why the regulatory burden has kept the structure rare in modern stablecoin design. It is education, not legal or investment advice. For a broader look at YLDS itself, start with our pillar on YLDS, Figure's SEC-registered yield-bearing stablecoin on Stellar.
What is a face-amount certificate?
A face-amount certificate is a debt instrument defined in Section 28 of the Investment Company Act of 1940. The issuer promises to pay a stated face amount, plus any contracted interest, at a defined maturity date. The certificate is registered with the SEC, the issuer is a regulated face-amount certificate company, and the assets backing the obligation must be held under the Act's custody and capital rules.
The structure predates crypto by almost a century. Insurance companies and consumer-finance firms used face-amount certificates from the 1920s through the mid-1900s to take in deposits and pay holders a contractual return at maturity. The Investment Company Act formalized the category in 1940 alongside mutual funds, closed-end funds, and unit investment trusts. The SEC's published text of the 1940 Act sets out Section 28's capital reserve, custody, and reporting requirements in detail. The SEC's historical filings list shows a small number of registered face-amount certificate companies remaining today, which is why the wrapper feels novel even though the underlying instrument is old.
What changed in 2025 is the wrapper. Figure Certificate Company, a Figure Technology Solutions affiliate, began issuing the certificates as Provenance Blockchain tokens rather than paper instruments in February of that year. The legal contract is the same one a 1955 holder would have recognized; the bearer is now a wallet address, transfers settle in seconds, and the token now also lives on Solana and Stellar.
How are face-amount certificates different from USDC or USDT?
USDC and USDT operate as electronic money under U.S. state money transmitter laws and parallel licenses abroad. Their issuers, Circle and Tether, redeem tokens for dollars on demand and publish reserve attestations, but holders are not registered investors and the tokens are not securities. A face-amount certificate is a security: holders are creditors of the issuer with rights defined by federal law, and the issuer can pay them contracted interest without recharacterization risk.
The contrast shows up in five places: who supervises the issuer, what disclosures the issuer must file, what holders own legally, what happens in insolvency, and whether yield can be paid directly to holders. The table below summarizes each axis using public regulatory filings and the issuers' own disclosures.
Stablecoin structure comparison
Dimension | USDC / USDT (money transmitter) | YLDS (face-amount certificate) |
Primary regulator | U.S. state regulators (NYDFS, others); FinCEN for AML | U.S. Securities and Exchange Commission |
Legal classification | Stored value / e-money instrument | Registered security under the 1940 Act |
Holder relationship | Customer of a money transmitter | Creditor of the issuer with statutory rights |
Disclosure regime | Monthly reserve attestations (voluntary scope) | SEC registration statement, ongoing periodic reports |
Yield to holders | Not paid (would risk securities classification) | SOFR minus 0.50%, accrued daily, paid monthly |
The takeaway is not that one model is universally safer. Money transmitter stablecoins clear faster on the redemption rail, accept fewer onboarding checks, and trade on more venues. SEC-registered certificates trade in a smaller venue set, but holders sit higher in the issuer's capital stack and receive standardized disclosures. For a side-by-side at the product level, see YLDS vs USDC.
What rights does a face-amount certificate holder actually have?
A certificate holder is owed a fixed sum at maturity plus contracted interest, and the obligation is enforceable as a debt of the issuer. If the issuer becomes insolvent, holders are unsecured creditors with claims that rank ahead of the issuer's equity but behind any secured debt. Federal securities laws give holders standing to sue for material misstatements in the registration statement.
Three concrete rights flow from Section 28 and the broader 1940 Act framework:
Capital and reserve requirements. A face-amount certificate company must maintain minimum capital and qualified investments backing outstanding certificates, with custody at a qualified bank. The numbers are filed with the SEC and reviewed in periodic exams.
Periodic disclosure. The issuer files a registration statement before issuance and ongoing reports thereafter. Material changes to assets, management, or operations must be disclosed to holders.
Antifraud protection. Sections 11 and 12 of the Securities Act of 1933 give holders private rights of action for material misstatements or omissions in offering documents. State money transmitter rules generally do not.
None of this guarantees principal. A certificate is unsecured, and the issuer can fail. What it does guarantee is a defined process, defined disclosures, and defined remedies, the same ones that govern bond holders and registered fund investors.
Why don't more stablecoins go this route?
The short answer is cost and ambiguity. Registering as a face-amount certificate company means filing under the Investment Company Act, hiring counsel to draft and amend the registration statement, submitting to SEC examinations, publishing audited financials, and meeting Section 28's capital reserve test. Issuers also have to register the certificates themselves under the Securities Act of 1933 and keep the registration current. Most stablecoin teams are software companies, not registered investment companies, and the runway needed to clear that bar is measured in years and millions of dollars of legal spend.
There is also a market reason. As long as a token issuer wants to keep yield away from holders to stay outside the securities perimeter, the money transmitter route is simpler and cheaper. Once an issuer wants to pay holders interest, which is the design choice YLDS made at SOFR minus 0.50%, staying outside the securities perimeter is no longer practical. SEC registration becomes the cleaner path.
Figure has prior experience here. Figure Certificate Company is the affiliate that issues the certificates, and Figure Technology Solutions (Nasdaq: FIGR) operates a broader onchain capital markets stack including blockchain-native lending and asset-backed securities. The team has been through SEC registration cycles before, which lowers the marginal cost of doing it again. We cover the company stack in Figure Technology's onchain stack.
What does SEC registration mean for stablecoin operators?
For an operator considering this path, registration unlocks two things and costs three. It unlocks the ability to pay yield directly to holders without recharacterization risk, and it reduces legal ambiguity for institutional partners that need to sell or hold the token under bank or broker-dealer rules. It costs ongoing legal and compliance overhead, lock-in to SEC examination cycles, and slower product iteration because material changes to the certificate must be reflected in updated filings.
A few practical implications worth flagging:
Distribution surface narrows in the short run. Many crypto exchanges list tokens under frameworks that assume non-security status. A registered certificate may need to trade on alternative trading systems or broker-dealer venues. YLDS trades on Figure Markets, which is a registered ATS.
Institutional surface widens over time. Pension funds, insurance treasuries, and bank trust desks have mandates that require registered securities. A face-amount certificate fits those mandates in a way an e-money token does not.
The yield mechanism must be disclosed. Holders are entitled to know how the issuer generates the contracted interest. YLDS discloses both the rate (SOFR minus 50 basis points) and the asset backing (U.S. Treasuries and Treasury repo, per Figure's Solana launch documentation).
Operators choosing between the two paths should also weigh which type of holder they want. A money transmitter stablecoin maximizes reach and onchain composability. A registered certificate maximizes legal clarity and holder protection, at the price of a smaller, slower trading surface.
Methodology and sources
Regulatory framework: Investment Company Act of 1940, Section 28 via the SEC; Securities Act of 1933 Sections 11 and 12 for antifraud holder remedies. Stablecoin classification context: Federal Reserve, "An Analysis of Stablecoins". YLDS facts: Figure Markets' Feb 2025 YLDS launch documentation, Figure's Nov 2025 Solana announcement, and the May 5, 2026 Stellar expansion press release. Stablecoin supply figures referenced as cluster context come from DeFiLlama's stablecoin endpoint as of May 4, 2026. The YLDS yield rate of SOFR minus 0.50% is taken directly from Figure's published documentation.