Circle, a leading stablecoin issuer, was recently involved in a legal dispute between the Securities and Exchange Commission (SEC) and Binance, a major cryptocurrency exchange. Circle argues that stablecoins, which depend on other assets for value stability, should not be subject to the same financial trading regulations as traditional securities.
Circle argues stablecoins are not securities
The Binance case has become critical in the cryptocurrency world, as major exchanges such as Binance and Coinbase have opposed subjecting cryptocurrencies to existing harsh US financial laws. In response to these claims, Circle presented its argument regarding dollar-linked assets such as BUSD and its own USDC.
Circle argues that these assets should not be treated as securities in the first place because users do not expect any profit from independent purchases of these stablecoins.
According to its filing, Circle states that “Payment stablecoins do not, by themselves, have the essential characteristics of an investment contract.” As a result, they believe these stablecoins fall outside SEC jurisdiction.
Circle also argues that decades of case law suggest that a sale of assets free from post-sale commitments or responsibilities of the seller is not sufficient to create an investment contract. This argument is of great importance in understanding Circle's stance on why stablecoins should not be classified as securities.
Circle added that decades of case law support the view that a sale of assets separate from the seller's post-sale promises or obligations is not sufficient to create an investment contract.
SEC's claim about Binance
Binance faced multiple accusations from regulators for legal violations in June. These accusations; It was involved in facilitating trades in cryptocurrencies, including Binance Coin (BNB), Polygon (MATIC), Solana (SOL), Cardano (ADA) and Binance’s stablecoin, BUSD. The Securities and Exchange Commission (SEC) alleged that these activities involved unregistered securities.
The US Securities and Exchange Commission (SEC) had accused Binance of selling BUSD as an investment contract due to the way it was promoted with returns offers through rewards programs. In response, last week Binance and its US arm and owner Changpeng “CZ” Zhao filed a petition to dismiss the SEC case.
Their arguments centered around the regulator's attempt to assert control over digital assets without proper authorization from Congress. The ongoing legal battle between Binance and the SEC has gained even more attention with Circle's latest involvement.
