SEC Challenges Stablecoins, Circle CEO Allaire Fights Back

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• Circle CEO Jeremy Allaire has challenged the SEC’s recent crackdown on Paxos and its issuance of Binance’s stablecoin.
• Allaire believes that Stablecoins are a payment system, not a security, and should not be regulated by the SEC.
• The SEC is relying on the Securities Act of 1933 to justify its jurisdiction over cryptocurrencies, including Stablecoins.

Circle CEO Challenges SEC’s Crackdown

Circle CEO Jeremy Allaire has said that Stablecoins should not be regulated by the SEC and are globally accepted as a payment system. This comes after the U.S. Securities and Exchange Commission (SEC) has stepped up efforts to regulate cryptocurrencies following TeraUSD’s demise and the collapse of FTX.

The Howey Test

The Securities Act of 1933 gives the SEC large scope for its jurisdiction, which goes beyond the commonly used Howey test. The Howey test is an American legal precedent for determining whether certain transactions qualify as „investment contracts,“ or securities under US law.

SEC Notice To Paxos

In October last year, SEC Chairman Gary Gensler called for greater regulation in the US on Stablecoins following TeraUSD’s failure in May. On February 13, 2021, The SEC issued a Wells notice to Paxos—the issuer of Binance USD (BUSD)—alleging that their Stablecoin was an unregistered security. Subsequently, The New York Department of Financial Services (NYDFS) ordered Paxos Trust to stop issuing BUSD tokens.

Allaire Defies Regulator Jurisdiction

Allaire asserts that Stablecoins are a payment system and not a security; therefore they should not be policed by the regulator body, despite having authority under Securities Act of 1933 to do so. He believes these fiat currency-pegged tokens are internationally recognised as payment systems with prudential regulator activity taking precedence over any potential enforcement from the SEC or CFTC..


Circle CEO Jeremy Allaire is challenging the stance taken by regulators towards Stablecoins such as BUSD with his belief that they are part of an international payments system rather than securities subject to enforcement from bodies such as the SEC or CFTC. Although this may go against current legislation, there appears to be some global recognition that these tokens represent more than just investments but can also facilitate payments between individuals worldwide without fear of censorship or manipulation due to their decentralised nature