- Circle argues that USDC, BUSD, and others are not securities, based on the interpretation established by the SEC.
- The SEC lawsuits against Coinbase and Binance are based on the allegations that the exchanges traded crypto assets, including stablecoins, illegally.
Circle, the USDC stablecoin issuer, has intervened in the SEC’s case against Binance, the global crypto exchange, declaring that stablecoins designed for payments are not under the Exchange Commission’s jurisdiction.
The Securities Exchange Commission, in June, charged Binance and its founder, Changpeng Zhao, for violating U.S. federal securities laws by operating “an unregistered securities exchange and failing to restrict U.S. customers from its platform.”
The agency stated multiple violations for facilitating trading in crypto assets, including stablecoins. It also alleged that the exchange had been commingling and diverting customers’ funds, as they had control over their assets.
At that time, Binance refuted the allegations in a blog post while stating its intention to defend the platform, as “Binance is not a U.S. exchange. The SEC’s actions are limited in reach.”
USDC Is Not a Security
Now, Circle has filed an amicus brief (friend-of-the-court) on payment stablecoin. The filing stated that assets tied to the dollar, such as USDC and BUSD, cannot be tagged as securities, partly because users do not expect profit from holding them.
“Payment stablecoins, on their own, do not have the essential features of an investment contract,” meaning they fall outside of SEC jurisdiction, Circle’s filing said. “Decades of case law support the view that an asset sale — decoupled from any post-sale promises or obligations by the seller — is not sufficient to establish an investment contract.”
The crypto exchange also clarified, in a recent blog post, that the filing was intended to aid the court’s consideration of the SEC’s allegations about BUSD and not in favor of either party.
“Circle has a strong interest in advancing a robust, well-defined regulatory and legal framework for payment stablecoins and in ensuring that existing laws and regulations are enforced with both vigor and precision,” the blog quoted the filed brief. “The SEC’s claim that Binance offered and sold its competing stablecoin as an unregistered security raises serious legal questions affecting digital currency and the U.S. economy more broadly.”
Aside from Circle, other crypto exchanges have dismissed the Securities Exchange Commission’s claims over what constitutes a security. In June, Cardano development company IOG said that the lawsuits filed against Binance and Coinbase, which had a list of “alleged securities,” including ADA, the native token, contained “numerous factual inaccuracies.”
“Under no circumstances is ADA a security under U.S. securities laws. It never has been,” IOG said at the time. “Understanding how decentralized blockchains operate is a fundamental component in creating responsible legislation.”
Coinbase announced its motion to dismiss in August, citing that it did not offer “investment contracts” as defined by the SEC, Supreme Court, and other regulatory bodies. The exchange’s chief legal officer, Paul Grewal, tweeted that the SEC had “abused its discretion and abandoned its own earlier interpretations of the securities laws” by ignoring the precedent set by the agency itself.
