Circle Defends Stablecoins as Non-Investment Contracts in SEC Case Against Binance

Circle Defends Stablecoins as Non-Investment Contracts in SEC Case Against Binance

Crypto News – The issuer of USDC, a stablecoin, contends that purchasers of stablecoins do not anticipate profits, making them not investment contracts. This perspective is bolstered by former commodities regulator Heath Tarbert.

Circle, a stablecoin issuer, has interceded in the Securities and Exchange Commission’s case against the major cryptocurrency exchange, Binance. Their argument posits that financial trading laws should not extend to stablecoins whose value is pegged to other assets.

In June, regulators charged Binance with multiple legal violations related to facilitating trades in various cryptocurrencies, including solana’s SOL, cardano’s ADA, and the Binance stablecoin BUSD. The SEC alleged that these constituted unregistered securities.

This case has become a significant focal point in the cryptocurrency space, as major crypto exchanges like Binance and Coinbase strive to assert that cryptocurrencies should not be subjected to existing stringent U.S. financial regulations.

Circle’s stance maintains that assets tied to the dollar, such as BUSD and their USDC, should not be classified as securities. One of their key arguments is that users purchasing these stablecoins do not expect to gain profits from standalone purchases.

“Payment stablecoins, on their own, do not possess the essential characteristics of an investment contract,” as stated in Circle’s filing. They contend that decades of legal precedent support the notion that a sale of assets, without subsequent promises or obligations by the seller, does not meet the criteria for an investment contract.

The SEC’s assertion is that BUSD was marketed and sold as an investment contract due to Binance promoting it as offering yield through reward programs. In response, Binance, its U.S. division, and its owner, Changpeng “CZ” Zhao, recently filed for the dismissal of the SEC case. Their argument centers on the regulator’s attempt to assert authority over digital assets without explicit authorization from Congress.