Circle backs Binance over BUSD status

Buyers of stablecoins do not expect profits, hence this category of assets does not correspond to investment contracts. This statement was made by Circle’s chief counsel and former head of the CFTC Hite Tarbert, according to CoinDesk.

The executive commented on the SEC‘s claims against Binance regarding Binance USD (BUSD), which was issued by Paxos on behalf of the crypto exchange. On June 5, the Commission filed a lawsuit against the platform and its CEO Changpeng Zhao. The agency has brought 13 counts, including selling unregistered securities, including BNB and BUSD.

Circle filed a brief with the court, acting as an amicus curiae. The company said that financial-services laws should not apply to stablecoins.

Stablecoins themselves do not possess material characteristics of a security under SEC jurisdiction. Decades of case law confirm that the sale of assets, not tied to any post-sale promises or obligations by the seller, is insufficient to constitute an investment contract, — the statement said.

In February, the NYDFS initiated an investigation into Paxos. The regulator ordered the company to stop issuing BUSD. Around the same time, the firm halted its cooperation with Binance.

The company halted the issuance of new stablecoins in line with the regulator’s instructions. Redeem and conversion operations are supported through at least February 2024.

In March, BUSD’s market capitalization fell below $10 billion for the first time since the end of June 2021. In June, the metric fell to $4.35 billion. By the time of writing, it had fallen to $2.26 billion, according to CoinGecko.

Regulation of stablecoins has been called for by both industry representatives and the head of the Fed Jerome Powell.

In June, the House Financial Services Committee introduced the third version of a proposed stablecoin bill.

Analysts at Bernstein previously projected that the capitalization of the stablecoins segment would rise from the current $125 billion to $2.8 trillion within five years.