- Circle Challenges SEC’s Case Against Binance, Asserts Stablecoins like USDC and BUSD Are Not Securities
- Circle contends that asset-backed stablecoins should be exempt from traditional securities regulations.
Circle, the company behind the USDC stablecoin, has entered the legal battle between the U.S. Securities and Exchange Commission (SEC) and Binance. The SEC filed a lawsuit against Binance and its CEO, Changpeng Zhao, in June, alleging violations of local securities laws.
The lawsuit specifically claimed that Binance’s affiliate, BAM Trading, had unlawfully sold unregistered securities, including BNB and the stablecoin BUSD.
Binance, as the world’s largest cryptocurrency exchange, is arguing, along with competitors like Coinbase, that cryptocurrencies should not be subject to the stringent existing financial regulations in the United States.”
Circle’s argument centers on the classification of cryptocurrencies like BUSD and its own USDC, which are pegged to the value of the US dollar. Circle contends that these stablecoins should not be treated as securities because purchasers do not expect to profit from their investments.
According to Circle, these stablecoins lack the essential characteristics of an investment contract and should therefore not fall under the regulatory authority of the SEC. Circle maintains that assets tied to the dollar, such as BUSD and USDC, cannot be considered securities, primarily because users do not anticipate any profit from standalone purchases.”
Circle’s filing states, ‘Payment stablecoins, in isolation, do not possess the fundamental attributes of an investment contract,’ implying that they should not be subject to SEC jurisdiction. The argument is grounded in decades of legal precedent, which suggests that the sale of an asset, without any subsequent promises or obligations by the seller, does not meet the criteria for an investment contract.“
Circle Emphasizes Decades of Legal Precedent, Asserting That Asset Sales, Unlinked to Post-Sale Commitments, Do Not Constitute Investment Contracts
Circle’s argument gains significant weight as it aligns with long-standing legal precedent, reinforcing the perspective that the sale of an asset, devoid of any subsequent promises or responsibilities by the seller, does not meet the criteria for establishing an investment contract.
This position holds paramount importance in understanding Circle’s stance on why stablecoins should not be classified as securities.