Circle Says Stablecoins Are Not Securities, Argues SEC Has No Jurisdiction Over Dollar-Pegged Crypto Assets

The issuer of the stablecoin USDC is refuting the general assertion of the U.S. Securities and Exchange Commission (SEC) that most crypto assets are securities.

Court documents show that Circle has filed an amicus curiae brief in the SEC’s case against crypto titan Binance. 

In the brief, Circle says the SEC is not empowered to regulate stablecoins – crypto assets used for making payments and settlements that are pegged 1:1 to the US dollar.

The firm highlights that these assets do not have the essential features of an investment contract, a type of security that the SEC oversees.  

“They do not independently give buyers any potential for profit, and certainly not based on the efforts of the stablecoin issuer. As a result, the SEC has no jurisdiction over such stablecoins, absent additional factors that turn the sale of the stablecoin into an investment contract.

Sales of payment stablecoins, without more, are just asset sales. 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 says it submitted the brief with the aim of shedding light on the nature of stablecoins. The SEC’s complaint alleges that Changpeng Zhao’s exchange engaged in the illegal offering and sale of an investment contract when it failed to register the Binance USD (BUSD) stablecoin with the securities watchdog.

“The SEC’s claim that Binance offered and sold its competing stablecoin as an unregistered security raises serious legal questions affecting digital currency and the U.S. economy more broadly. Circle therefore submits this brief pursuant to Local Rule 7(o), not to support either party, but to assist the Court in understanding stablecoins and their status under the federal securities laws.”

While Circle says that payment stablecoins should be beyond the SEC’s purview, the firm notes that dollar-pegged crypto assets should still be subject to a “sound regulatory regime that protects both consumers and US financial stability.”

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