Stablecoin Issuer Circle Challenges SEC’s Authority in Binance Case

• Major stablecoin company Circle seeks to limit SEC’s reach in a lawsuit against Binance.
• Circle argues that stablecoins like BUSD and USDC shouldn’t be considered securities due to their value source.
• Stablecoin issuer intervenes in the SEC’s pursuit of Binance, which is accused of illegal crypto asset securities offerings.

Major stablecoin company Circle seeks to limit the SEC’s reach in an ongoing lawsuit alleging unregistered securities trading by crypto exchange Binance. Circle filed a motion arguing stablecoins like BUSD and USDC cannot legally constitute securities when their value derives from an underlying asset.

Circle intervened as the SEC pursues Binance for allegedly offering crypto asset securities illegally, including its BUSD stablecoin. Binance claims the regulator lacks authority to categorize most digital tokens as securities without Congressional action.

Circle says stablecoins remain outside SEC jurisdiction

Now Circle contends stablecoins tied to external collateral like the U.S. dollar sit firmly outside SEC jurisdiction. Its filing states stablecoins intrinsically lack the essential features of regulated investment contracts by only reflecting underlying assets.

Circle says decades of legal precedent confirm asset sales alone cannot establish securities arrangements without additional profit promises from sellers. The company believes isolating stablecoins from SEC authority is vital to providing regulatory clarity.

However, the SEC alleges that Binance marketed BUSD’s potential yields through reward programs. Regulators say promoting income opportunities beyond direct redemption can classify some stablecoins as securities.

The filing represents a shot across the bow against regulatory overreach by Circle, the issuer of the world’s largest stablecoin USDC. The company wants to restrain the SEC’s industry authority before it likewise targets USDC.

However, the SEC maintains that leeway exists to regulate stablecoins that operate more like return-generating investments. And Circle risks blowback by interfering in the high-stakes Binance case.

Still, Circle and Binance share an interest in curtailing the SEC’s flexibility to designate crypto assets as securities. Their rare alliance highlights the urgency of clarifying stablecoins’ regulatory treatment.

Legal experts say Circle raises valid points about stablecoins’ inherent utility differing from speculative investments. But limitations remain untested, and the SEC argues misleading promotions can still push stablecoins into security territory.

The stakes are high with the SEC pursuing an industry-wide crackdown. However, consensus remains elusive around stablecoins’ proper oversight framework as regulations evolve.