- Circle: Stablecoins can’t constitute securities because buyers don’t expect any profit
- SEC: Binance claimed buyers would gain returns from its stablecoin BUSD
Circle has intervened in favor of leading crypto exchange Binance’s case against the US Securities and Exchange Commission (SEC), CoinDesk wrote. Circle issues the USDC stablecoin, one of the biggest by market cap.
The stablecoin issuer argues that stablecoins are not securities and financial trading laws shouldn’t apply to them.
Binance charged with multiple violations
In June, US financial watchdogs filed numerous lawsuits against Binance, alleging multiple legal violations for supporting trade of unregistered securities. According to regulators, trades in cryptocurrencies such as ADA, SOL, and the Binance stablecoin BUSD were unlawful.
In June, Binance’s US arm and SEC reached an agreement for the exchange to keep operating and avoid a full asset freeze.
Coinbase is also fighting
The case against Binance is highly significant. The exchange is trying to evade what it considers undue sanctions and its bid is supported by rival exchanges, such as Coinbase, who have been very active and outspoken against regulators.
The SEC sued Coinbase in early June this year, arguing that they processed orders, solicited customers, acted as a middleman, and accepted bids all at once.
Buyers don’t expect a profit
Circle claims that stablecoins, which are in a 1:1 currency peg to the US dollar, can’t constitute securities because buyers don’t expect any profit. In a court filing known as a “friend of the court brief”, Circle states:
Payment stablecoins, on their own, do not have the essential features of an investment contract. Decades of case law support the view that an asset sale — decoupled from any post-sale promises or obligations by the seller — is not sufficient to establish an investment contract.
Why is BUSD a security?
According to SEC, Binance sold its stablecoin as a security because the exchange claimed buyers would gain returns through reward programs. Binance argues the SEC has no authority over digital assets and the court should dismiss the case.
