Stablecoins Are Not Securities: Circle Argues in Favor of Binance

• Circle, the issuer of the USDC stablecoin, has filed an amicus curiae in support of Binance.
• According to Circle, financial trading laws should not affect stablecoins whose value is tied to other assets.
• Circle’s Chief Legal Officer says stablecoins cannot be classified as investment contracts.

Circle, the issuer of the USDC stablecoin, has filed an amicus curiae or friend of the court brief in support of Binance in the ongoing case with the Securities and Exchange Commission (SEC). According to Circle, financial trading laws should not affect stablecoins whose value is tied to other assets.

The stablecoin issuer’s amicus curiae was made partly by its Chief Legal Officer, Heath Tarbert, former chair of the Commodity Futures Trading Commission (CFTC). According to the filing, payment stablecoins cannot be classified as investment contracts. A segment of the filing read:

“Payment stablecoins, on their own, do not have the essential features of an investment contract,” meaning they fall outside of SEC jurisdiction. 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.”

The SEC sued Binance, the world’s leading crypto exchange in trading volume, charging it with multiple legal violations for facilitating crypto trading. In the filing, the SEC alleged that Solana’s SOL, Cardano’s ADA, and the Binance stablecoin BUSD constituted unregistered securities.

According to the SEC, Binance marketed BUSD as an offering yield through reward programs. Thus, Binance sold the stablecoin as an investment contract. The allegation by the SEC has raised several eyebrows among stakeholders in the cryptocurrency industry, with the current case appearing as one of the main issues in the industry this year.

Binance, in conjunction with its US arm and its founder Changpeng Zhao (CZ), has since filed for the SEC case to be dismissed. It argued that the SEC is not authorized by Congress to seek authority over digital assets. 

According to Circle, the Binance BUSD and other stablecoins like its own USDC are tied to the US dollar. Hence, they cannot be classified as Securities. Part of Circle’s argument is that the stablecoins do not offer standalone profit opportunities to users who purchase them.