• Circle CEO Jeremy Allaire believes the U.S. Securities and Exchange Commission should not be assigned to regulate stablecoins.
• Allaire suggests that stablecoins can be treated as payment systems, which would exempt them from being classified as securities.
• He also supports SEC regulations on qualified custodians, which would provide protection against bankruptcy and control assets held by exchanges.
Stablecoin Regulation Shouldn’t Be Assigned to U.S. SEC
Circle CEO Jeremy Allaire has expressed his belief that the U.S. Securities and Exchange Commission (SEC) should not be tasked with regulating stablecoins in an interview with Bloomberg on Feb 23rd.
Allaire insists that most regulators consider stablecoins a payment system, meaning they won’t be classified as securities and thus don’t fall under the SEC’s jurisdiction.
He further recommends separate SEC regulations that impose stricter rules around cryptocurrency custody, including rules for qualified custodians that will protect users from bankruptcy and control assets held by exchanges better than currently possible.
Binance USD & TerraUSD
The SEC recently took action against two prominent stablecoins – Binance USD (BUSD) and TerraUSD – to determine their legal status in the US market due to their respective price pegs of $1 USD each being maintained differently between them; Binance USD is backed by traditional assets while TerraUSD is algorithmically determined using crypto assets, leading it to lose most of its value in May 2022 after issuance earlier in 2021.. While Paxos had stopped issuing Binance USD following requests from New York regulators, rumors emerged shortly afterwards that Circle had received a similar notice — rumors which were quickly debunked by Circle themselves later on.
Gary Gensler’s Opinion
SEC Chair Gary Gensler has repeatedly suggested that stablecoins could come under the regulator’s jurisdiction, comparing them to certain securities last September when he spoke on the topic during a speech at Georgetown Law School. He further likened them to poker chips when speaking at a virtual event hosted by CoinDesk last October where he discussed how regulation could affect cryptocurrencies as a whole more broadly .
Allaire drew attention to lessons learned from random exchanges holding user assets, suggesting appropriate controls are needed through qualified custodian rules for asset security going forward if digital currencies are going have any chance at mainstream adoption in finance markets around the world .
Overall it seems clear based off both Allaire’s comments and Gensler’s opinion assessments over recent months that both parties agree some form of regulation is needed for stablecoins if they are ever going to become widely accepted within financial markets domestically or abroad