Circle Joins Binance Legal Battle With The SEC

Circle Weighs In On SEC’s Lawsuit Against Binance, Says Stablecoins Are Not Securities

Updated: 29 September 2023

Disclosure

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Join Our Telegram channel to stay up to date on breaking news coverage

Stablecoin issuer Circle weighed in on the Securities and Exchange Commission’s (SEC) lawsuit against Binance, arguing that stablecoins are not securities.

The SEC had said in its June lawsuit that the Binance USD (BUSD) stablecoin was sold as an investment contract, and thus a security under the law, because it offered a yield via a reward program. Circle’s filing argues that stablecoins cannot be securities.

“Payment stablecoins, on their own, do not have the essential features of an investment contract,” it said in a court filing. “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 also argued that assets pegged to the dollar are not securities because their buyers do not anticipate making a profit given the 1:1 ratio to the fiat currency it is pegged to.

Binance Fights for Survival

The lawsuit against Binance threatens the exchange’s existence in the US, resulting in a myriad of issues for the company.

Trading volume has slumped, leading to the laying off of 30% of employees in Binance.US.

Binance and its CEO, Changpeng Zhao(CZ), filed this week for the SEC’s case to be dismissed, arguing that the SEC was overstepping its authority.

https://twitter.com/TheHongVan68/status/1705049040180871363

The motion argued that the SEC had not put in place regulations for the oversight of crypto product and thus it was involved in a retroactive attempt to use its regulatory power against them.

“The SEC pursues these novel theories retroactively, seeking to impose liability for sales of crypto assets that occurred as far back as July 2017, before the SEC provided any public guidance concerning cryptocurrency,” it said. “It is clear that the SEC’s lawsuit has no foundation in the currently enacted securities laws.”