Circle Claims Stablecoins are not Securities
- Circle argued that payment stablecoins do not have the “features of an investment contract” on their own.
- The SEC claims NFTs also qualify as securities.
- US lawmakers have shown strong interest in regulating stablecoins.
USDC’s parent company, Circle, has reacted to the ongoing case between the US Securities and Exchange Commission (SEC) and cryptocurrency exchange Binance, claiming that stablecoins are not securities.
Circle, in a court filing, claimed that digital assets pegged to the price of sovereign currencies such as the US dollar are not securities because users who buy them have no expectation of making a profit.
The SEC noted that it uses the “reasonable expectation of profits” as a way of determining what qualifies as securities. However, Circle believes that while stablecoins are “redeemable at a constant value,” they do not satisfy the requirement on their own. Circle argued that payment stablecoins such as the Binance coin (BUSD) or USDC do not have the “features of an investment contract” on their own.
The SEC filed 13 charges against Binance, accusing the exchange of violating several laws. The regulator claimed Binance’s sale of the BUSD token qualified as the sale of unregistered securities. In addition, the SEC accused Binance of failing to register its presence in the US and providing illegal services.
Binance and its CEO, Changpeng Zhao, recently asked the court to dismiss the regulator’s charges. Binance and Zhao argued that the SEC crossed its jurisdiction when suing them. In addition, Binance and Zhao’s attorneys claimed that the SEC enforced its control over the crypto industry and failed to provide definitive standards for the sector before suing Binance and Zhao.
Circle believes the SEC’s charges against Binance could have a broader impact on the future of stablecoins. The SEC’s actions against Binance marked the first time that the agency claimed stablecoins constituted a security in court.