The dispute between the SEC and Binance has taken a dramatic turn following Circle’s recent intervention.
Last June, the U.S. Securities and Exchange Commission (SEC), sued Binance and its CEO, Changpeng Zhao, alleging various violations of federal laws for operating without registration and facilitating, in turn, cryptocurrency trading in securities without existing registration. In total, the regulator filed thirteen charges against Binance. This is arguably one of the most relevant cases in the sector, as it puts the world’s largest digital asset exchange against the wall.
On September 22, Binance and Zhao asked the court to dismiss the lawsuit. They both claim that the SEC has exceeded its authority in suing them. Counsel for Binance and Zhao argue that the SEC itself has not established clear guidelines within the industry prior to filing the lawsuit, thereby acting retroactively, which is far from – arguably – a state of legal security. The articulation of a clear legal regime is a guarantee for the free development of citizens in the market.
With the case underway, Circle – the issuer of the USDC stablecoin, the second largest in the cryptocurrency market – has decided to intervene as amicus curiae, but without taking sides. In its brief, Circle noted that “stable payment currencies, standing alone, do not have the essential characteristics of an investment contract.”
It is a matter of determining the legal nature of these transactions, which, perhaps because of their novelty, do not fit with the necessary fairness in the current regulations. Indeed, continues Circle’s presentation, “Decades of case law support the view that a sale of assets (untied to any post-sale promise or obligation on the part of the seller) is not sufficient to establish an investment contract”. If the user does not expect benefits from such assets, they could not, in effect, constitute securities, contrary to what the SEC seems to consider.
Circle’s intervention is quite timely, certainly, given that it comes as lawmakers seek to regulate stablecoins.
