Circle, the entity behind issuing stablecoins, has intervened in the ongoing legal dispute between the Securities and Exchange Commission (SEC) and the prominent cryptocurrency exchange, Binance.
In an amicus curiae brief, Circle posited that stablecoins, which derive their value from underlying assets, shouldn’t be regulated in the same manner as conventional securities, as per CoinDesk.
The SEC initiated its case against Binance in June, focusing on claims that the exchange engaged in various legal breaches associated with its cryptocurrency trading services.
SEC Claims BUSD is an Investment Contract
The Binance stablecoin, BUSD, finds itself in the spotlight, along with other digital currencies such as Solana’s SOL and Cardano’s ADA.
The SEC argues that these digital assets are akin to unregistered securities.
This lawsuit is shaping up to be one of the landmark legal confrontations in the crypto sector, potentially setting a precedent for the industry’s regulatory landscape in the U.S.
Binance, joined by peers like Coinbase, remains resolute in its stance that cryptocurrencies shouldn’t fall under the strict financial regulations that the U.S. currently enforces.
Stablecoins Shouldn’t be Classified as Securities
In its amicus brief, Circle contends that stablecoins pegged to the U.S. dollar, like BUSD and its proprietary USDC, shouldn’t be categorized as securities.
A central pillar of Circle’s argument is that those acquiring these stablecoins don’t expect to gain a profit purely from their individual transactions.
Moreover, Circle emphasizes long-standing legal precedents which underscore the idea that selling an asset, especially when no post-sale promises or duties are tied to the seller, doesn’t create an investment contract.
As of this article’s deadline, Circle has yet to reply to our request for a statement.
In its litigation against Binance, the SEC alleges that Binance portrayed BUSD as an investment contract by promoting it with the allure of earnings via reward schemes.
Countering this, Binance, its American branch, and the company’s CEO, Changpeng “CZ” Zhao, have submitted a request for the SEC lawsuit to be dismissed. Their counterclaim suggests that the regulatory body is trying to exert control over digital currencies without the proper mandate from Congress.