Circle Advocates for Stablecoins as Non-Securities in Binance's SEC Case

Police & Regulations
Oct 3, 2023 at 12:18 pm

Circle, the issuer behind the stablecoin USDC, has waded into the legal battle surrounding Binance, a prominent cryptocurrency exchange, and the Securities and Exchange Commission's ongoing case. They're putting forth the argument that the regulatory landscape for financial trading should not encompass stablecoins, which derive their value from underlying assets.

In June, Binance found itself in the crosshairs of multiple legal charges for its role in facilitating trades involving various cryptocurrencies like Solana's SOL, Cardano's ADA, and their own stablecoin BUSD. The SEC's position is that these transactions constituted unregistered securities, making this case a pivotal one within the crypto space. Binance, along with competitors like Coinbase, is vigorously contending that cryptocurrencies should not be subjected to the prevailing stringent U.S. financial regulations.

Circle's stance revolves around assets such as BUSD and their USDC, both of which are tethered to the value of the U.S. dollar. They assert that these assets cannot be classified as securities, primarily because purchasers do not anticipate any returns from standalone transactions.

According to their submission, "Standalone payment stablecoins lack the essential characteristics of an investment contract," signifying that they fall beyond the scope of the SEC's jurisdiction. They further argue that, based on decades of legal precedent, the sale of an asset without any additional promises or obligations by the seller does not meet the criteria for an investment contract.

The SEC's contention against BUSD stems from Binance's promotion of it as an investment contract, promising returns through reward programs. Last week, Binance, including its U.S. division and its founder Changpeng "CZ" Zhao, filed a motion to dismiss the SEC's case. They asserted that the regulator is attempting to assert authority over digital assets without the requisite authorization from Congress.

Circle's submission, referred to as an amicus curiae or a friend of the court brief, is in part led by their Chief Legal Officer Heath Tarbert, who formerly served as the chair of the Commodity Futures Trading Commission. This federal regulatory agency is also involved in legal action against Binance.

Read more: CommEX: The Rising Star of Crypto Denies Binance Connection Amid Acquisition Buzz

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