Stablecoin Issuer Circle Challenges SEC’s View on Stablecoins in Binance Case

Sablecoin issuer Circle has entered the legal fray between Binance and the U.S. Securities and Exchange Commission (SEC). They’re emphasizing that stablecoins, which include Binance’s BUSD and Circle’s USDC, shouldn’t be classified as securities as per prevailing financial regulations.

Earlier in the year, Binance found itself in hot water. The issue at hand: transactions in certain cryptocurrencies that, as per the SEC, are unregistered securities. The regulatory body believes that cryptocurrencies such as Solana’s SOL, Cardano’s ADA, and notably, the stablecoin BUSD, fall under this category. Central to the SEC’s argument is that Binance’s promotional strategies, including promising yield through rewards, made BUSD come off as an investment contract. In retaliation, Binance, along with its U.S. subsidiary and CEO Changpeng “CZ” Zhao, sought to dismiss the SEC’s lawsuit, contending the regulatory agency is trying to regulate digital assets without clear authority from Congress.

Taking a firm stance, Circle asserts that the very nature of payment stablecoins like BUSD and USDC is at odds with what is considered an investment contract. Circle detailed in their statement, “Historical precedents clearly demonstrate that simple asset sales, when not paired with subsequent obligations by the seller, cannot be classified as investment contracts.”

Furthermore, Circle underscores that those who use these stablecoins aren’t expecting to make profits from individual transactions. This view becomes even more pertinent when juxtaposed with the SEC’s allegations about how Binance promoted BUSD.

Circle’s participation in this legal matter isn’t ordinary. Their submission, known as an “amicus curiae” or “friend of the court” brief, carries weight, particularly since Heath Tarbert, Circle’s Chief Legal Officer, previously helmed the Commodity Futures Trading Commission. This federal agency is another heavyweight that is, interestingly, also pursuing legal avenues against Binance.