Stablecoin issuer Circle has joined the Securities and Exchange Commission’s (SEC) case against crypto exchange Binance, arguing that stablecoins tied to other assets should not fall under the purview of financial trading laws. The SEC charged Binance with multiple legal violations for facilitating trades in cryptocurrencies and its stablecoin BUSD, which it claimed constituted unregistered securities. As regulators and major crypto exchanges like Coinbase aim to prove that crypto is not subject to existing U.S. financial laws, this case has become one of the most significant in the crypto industry.
Circle argues that assets like BUSD and its own stablecoin USDC cannot be categorized as securities, primarily because users don’t expect any profit from standalone purchases. The filing notes that payment stablecoins lack the essential characteristics of an investment contract and do not fall within the jurisdiction of the SEC. Circle’s Chief Legal Officer Heath Tarbert, former chair of the Commodity Futures Trading Commission, has made the filing as an amicus curiae or friend of the court brief. The SEC claimed that BUSD was sold as an investment contract due to Binance marketing it as offering yield through reward programs. Binance, its U.S. arm, and its owner Changpeng “CZ” Zhao have filed to dismiss the SEC case, arguing that the regulator is seeking authority over digital assets without congressional authorization.
In summary, Circle has intervened in the SEC’s case against Binance, asserting that stablecoins tied to other assets should not be regarded as securities. The case has significant implications for the broader crypto industry, with major exchanges seeking to establish that cryptocurrencies are not subject to existing U.S. financial laws. Circle argues that payment stablecoins, like BUSD and USDC, lack the essential elements of an investment contract and fall outside the SEC’s jurisdiction. The SEC, on the other hand, claims that BUSD was marketed as an investment contract by Binance. The outcome of this case will shape the regulatory landscape concerning stablecoins and their treatment under financial trading laws.