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Circle Says Stablecoins Are Not Securities in SEC Case Against Binance

Circle, the issuer of the USDC stablecoin, has reportedly filed a brief in the Securities and Exchange Commission’s (SEC) case against Binance, one of the world’s largest crypto exchanges.

In the brief, Circle argued that stablecoins, which have value tied to other assets, should not be classified as securities, CoinDesk reported Friday (Sept. 29).

In the ongoing legal battle between Binance and the SEC, Circle argued in the amicus curiae brief that stablecoins like USDC and Binance’s BUSD should not be considered securities, according to the report. Circle contended that payment stablecoins do not possess the characteristics of an investment contract, as users do not expect profit from standalone purchases.

“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,” Circle’s filing said, per the report.

The SEC had alleged that BUSD was sold as an investment contract due to Binance’s marketing of yield through reward programs, the report said.

Circle Chief Legal Officer Heath Tarbert is a former chair of the Commodity Futures Trading Commission (CFTC), another federal regulator that is also suing Binance, per the report.

The SEC filed 13 charges June 5 against Binance and its founder, Changpeng Zhao, saying the crypto asset trading platform committed a variety of securities law violations. The SEC’s charges include operating as unregistered exchanges, brokers, dealers and clearing agencies; making unregistered offers and sales of crypto assets; failing to restrict U.S. investors from accessing Binance.com; and misleading investors.

Binance responded at the time with a blog post saying it was “disappointed” with the SEC’s decision because Binance had cooperated with the regulator’s investigations, worked to address its concerns and aimed to reach a negotiated settlement.

More recently Binance.US — the American affiliate of Binance — pushed back Sept. 12 on an SEC request for discovery and depositions, saying that the regulator’s motion asking for more information and testimony by Binance.US executives is “unduly burdensome” and “freewheeling.”

Binance.US also said the SEC has yet to show that customer funds were unlawfully diverted.

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