Circle Enters the Fray: Stablecoins Are Not Securities in SEC vs. Binance Case

Circle, the entity responsible for the USD Coin (USDC) stablecoin, has entered the ongoing legal battle between the United States Securities and Exchange Commission (SEC) and Binance, contending that stablecoins should not be classified as securities.

In a recent court filing, Circle made the argument that assets like Binance USD (BUSD) or USDC, which are pegged to the U.S. dollar, should not be considered securities. Their rationale is based on the premise that individuals purchasing these assets do not anticipate any profit from acquiring them. According to Circle, payment stablecoins lack the defining characteristics of an investment contract on their own, thereby challenging their categorization as securities by the SEC.

The SEC initiated legal action against Binance on June 5, levying a total of 13 charges against the cryptocurrency exchange. Among these charges were allegations that the sale of BNB tokens and BUSD tokens constituted unregistered security sales. Additionally, the SEC claimed that Binance had failed to register as a broker-dealer clearing agency and had been operating illegally within the United States.

In response, Binance and its CEO Changpeng Zhao sought the dismissal of the SEC lawsuit on September 22. Their legal defense argued that the SEC had exceeded its jurisdiction in the lawsuit, highlighting a lack of clear regulatory guidelines for the industry before the lawsuit was initiated. Binance and Zhao’s lawyers contended that the SEC retroactively imposed its authority over the crypto industry without adequate prior notice.

The SEC’s regulatory scrutiny has extended beyond cryptocurrencies and exchanges to encompass nonfungible tokens (NFTs) as well. The regulatory body filed charges against entertainment company Impact Theory on August 28, citing the sale of unregistered securities through its NFT collection. Furthermore, on September 13, the SEC targeted the entity behind the Stoner Cats NFT collection, accusing them of facilitating the sale of unregistered securities by offering NFTs to the public.

These developments underscore the evolving landscape of crypto regulations, with entities like Circle actively challenging the SEC’s interpretation of stablecoins and other digital assets within the framework of securities laws. The outcomes of these legal disputes will significantly impact the future regulatory environment for cryptocurrencies and blockchain-based assets in the United States.

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