Circle, a stablecoin issuer, has taken a stance in the Securities and Exchange Commission’s (SEC) case against Binance, arguing that stablecoins tied to other assets should not fall under financial trading laws. The SEC charged Binance with multiple legal violations for facilitating trades in cryptocurrencies, including solana’s SOL, cardano’s ADA, and the Binance stablecoin BUSD, alleging that they were unregistered securities. This case has become significant in the crypto world as major exchanges like Binance and Coinbase strive to prove that cryptocurrencies should not be subjected to existing stringent U.S. financial laws.
Circle’s argument is centered around the claim that assets like BUSD and their stablecoin USDC cannot be considered securities because their users do not expect any profit from standalone purchases. The company stated in its filing that payment stablecoins lack the essential features of an investment contract and should, therefore, fall outside the SEC’s jurisdiction. They also cited decades of case law that support the view that an asset sale without any post-sale promises or obligations from the seller does not establish an investment contract.
The SEC alleged that BUSD was marketed as an investment contract by Binance, as it was promoted to offer yield through reward programs. In response, Binance, its U.S. arm, and Changpeng “CZ” Zhao, its owner, filed to dismiss the SEC case, arguing that the regulator seeks authority over digital assets without proper congressional authorization. Circle’s Chief Legal Officer, Heath Tarbert, who previously chaired the Commodity Futures Trading Commission, another federal regulator suing Binance, has filed an amicus curiae or friend of the court brief in support of Circle’s argument.