Circle CEO Says Stablecoins Should Not Be Regulated By SEC

By Kevin • February 24, 2023 9:28 pm • Comments

One of the most concerning things in the crypto industry recently was the SEC’s decision to accuse the Binance USD (BUSD) stable coin of being an unregistered security.

The Binance USD stable coin is issued by a company called Paxos and the SEC has already been in discussions with the company.

As a result of those discussions, Paxos had shared that it would stop issuing new BUSD stable coins starting February 21.

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Given that the SEC has already taken action against one of the stable coins, many investors and speculators are worried about the fact that there is nothing stopping the SEC from going after another stable coin.

Jeremy Allaire, the CEO of Circle, shared his thoughts and stated that this should not be done by the SEC because stable coin assets should be part of the banking sector which means they should be regulated by another government entity instead of the SEC.

CryptoPotato reports:

This rattled a lot of cages in the community, as stablecoins were widely considered non-securities. It also brought the attention to other stablecoin issuers, such as Tether and Circle.

The latter’s CEO – Jeremy Allaire – spoke to Bloomberg about the current situation and asserted that the SEC doesn’t seem like the proper regulator for such cryptocurrency assets.

“I don’t think the SEC is the regulator for stablecoins. There is a reason why everywhere in the world, including the US, the government is specifically saying payment stablecoins are a payment system and banking regulator activity.”

Nevertheless, Allaire admitted that “not all stablecoins are created equal.” This comes less than a year after the controversial algorithmic attempt from Terra (UST) crumbled to virtually $0, wiping the entire $40 billion ecosystem out.

At the same time, Circle’s CEO praised the SEC’s recent proposal to incorporate more stringent rules on crypto custodians.

The SEC potentially going after stable coins could make the entire crypto industry go down a slippery slope given that much of the market trading volume consists of stable coins.

As of right now, a few stable coins rank within the top 10 digital currencies when measured by total market cap such as Tether and USDC.

It also does not make sense that the SEC would accuse a stable coin of being a security due to the fact that the Howey test is usually used to make that determination.

However, the stable coin would not fit that criteria because it does not generate profit for users who acquire it, but rather it is used as a digital representation of a fiat currency.

It is important that lawmakers and the crypto community push back on this recent event so that it does not have greater implications on the market later.

Reuters.com concludes:

Binance did not immediately respond to a request for comment, but has said it would continue to support Binance USD for the foreseeable future.

Cascarilla said that Paxos was still working with the SEC towards the publication of its application to obtain a clearing agency license, and with the U.S. Office of the Comptroller of the Currency (OCC) to get final approval for its national trust bank charter.

The OCC declined to comment.

Stablecoins, digital tokens typically backed by traditional assets designed to hold a steady value, have emerged as one of the key cogs in the crypto economy. They are used for trading between volatile tokens like bitcoin and, in some emerging economies, as a means to protect savings against inflation.

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