Circle supports Binance! Intervenes in lawsuit with SEC, believes BUSD should not be considered a security

Regarding the lawsuit between Binance and the SEC, stablecoin issuer Circle recently came out in support of Binance, arguing that stablecoins like BUSD and USDC, which are pegged to other assets, should not be considered securities when they do not meet the criteria of an investment contract.

Binance Faces Multiple Charges from SEC, BUSD Considered as Securities

The SEC filed charges against Binance in June this year, citing multiple violations of securities laws. Among them, the SEC alleges that Binance offers securities trading and points out that 12 cryptocurrencies, including BNB and BUSD, are unregistered securities.

Full report: SEC Accuses Binance Holdings and Changpeng Zhao of Violating Securities Laws, BNB Falls Below Recent Lows

Among these assets, the SEC specifically analyzed BUSD as being classified as a security, focusing on the following 3 points:

1. Trouble with BUSD Interest Products: Binance aggressively promoted the profit potential of BUSD, where holding BUSD could earn various "APY" annual percentage yields, including Binance Earn, margin, and futures products. For example, the "BUSD Reward Program" promises users to earn interest simply by holding BUSD on the Ethereum chain.

2. BUSD as an Investment Contract: The SEC claims that since its inception, BUSD has been offered and sold as an investment contract, making it a security.

3. Paxos and Binance Profiting from BUSD Together: The SEC alleges that Trust Company A (Paxos) agreed to separately invest BUSD reserve funds such as bonds, and both A and Binance agreed to equally share the related interest income, which Binance then used to promote BUSD.

Explaining the SEC's Securities Standard Determination: Issuing teams discuss technology, token supply ownership, and designing deflation mechanisms are all crimes

This lawsuit is still ongoing, and Binance seems to be facing serious operational issues over the past few months, with over 10 senior executives leaving and a one-third reduction in staff. The Wall Street Journal reported this week that the Justice Department has been investigating Binance for a year, and CZ may face criminal charges and fines of billions of dollars.

Circle Believes BUSD is Not a Security

According to a report by CoinDesk, Circle has intervened in the case between the SEC and Binance, arguing that financial transaction laws should not extend to stablecoins such as USDC and BUSD that are pegged to value and other assets.

In other words, Circle disagrees with the SEC's classification of BUSD as a security, as its users do not expect to profit from solely purchasing BUSD.

In the document, Circle states:

"Payment stablecoins do not possess the basic characteristics of an investment contract, and decades of case law support this view, namely that the sale of assets is not sufficient to establish an investment contract when the seller does not provide any post-sale promises or obligations."