Stablecoin issuer Circle has intervened in the Securities and Exchange Commission’s (SEC) case against Binance, arguing that financial trading laws should not be applied to stablecoins that are backed by other assets. In June, Binance was charged with multiple legal violations by regulators for facilitating trades in cryptocurrencies, including solana’s SOL, cardano’s ADA, and the Binance stablecoin BUSD, which the SEC claims are unregistered securities. This case has become one of the crypto industry’s most significant, as major exchanges like Binance and Coinbase seek to challenge the notion that crypto falls under existing U.S. financial regulations.
Circle argues that stablecoins tied to the U.S. dollar, such as BUSD and its own USDC, should not be considered securities. One of the reasons provided is that users of these stablecoins do not expect to profit from standalone purchases. Circle’s filing states, “Payment stablecoins, on their own, do not have the essential features of an investment contract.” The company claims that decades of case law support the view that a sale of an asset without any post-sale promises or obligations does not constitute an investment contract.
The SEC alleged that BUSD was marketed by Binance as an investment contract, as it offered yield through reward programs. Binance, along with its U.S. arm and owner Changpeng “CZ” Zhao, filed to dismiss the SEC case, arguing that the regulator is seeking authority over digital assets without congressional authorization. Circle’s Chief Legal Officer, Heath Tarbert, who is also the former chair of the Commodity Futures Trading Commission, has filed an amicus curiae brief in support of Binance. This filing adds another layer of support to Binance’s arguments against the SEC’s jurisdiction over stablecoins.