In a surprising move, Circle, the company behind the USDC stablecoin, has filed a motion with the court to provide some information on behalf of the SEC regarding four other stablecoins: USDT, TUSD, BUSD, and FDUSD. The motion comes as part of the ongoing lawsuit between the SEC and Ripple, the issuer of XRP, over whether XRP is a security or not.
According to the motion, Circle claims that it has relevant and material information about the four stablecoins that could help the court determine the nature and status of XRP. Circle argues that USDT, TUSD, BUSD, and FDUSD are not securities, but rather digital assets backed by fiat currencies or other assets. Circle also asserts that these stablecoins are widely used in the crypto industry and have a significant impact on the market price and liquidity of XRP.
Circle has intervened in the Securities and Exchange Commission’s case against major crypto exchange Binance, arguing that financial trading laws shouldn’t spread to stablecoins whose value is tied to other assets. In June, regulators charged Binance with multiple legal violations for facilitating trades in cryptocurrencies, such as Solana’s SOL, Cardano’s ADA and the Binance stablecoin BUSD, which the SEC alleged constituted unregistered securities. That’s become one of the most major cases in crypto right now, as the world’s biggest crypto exchange – alongside rivals like Coinbase – seek to argue that crypto isn’t caught by existing heavy-handed U.S. financial laws.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
Circle’s motion is likely to raise some eyebrows in the crypto community, as it seems to be siding with the SEC against Ripple, despite being a major player in the stablecoin space. Some may wonder why Circle would voluntarily offer to share information with the SEC, especially when it is facing its own regulatory scrutiny over USDC. Others may speculate that Circle is trying to gain some favor with the SEC or distance itself from other stablecoins that may be under investigation.
Whatever the motive, Circle’s motion could have important implications for the outcome of the SEC vs Ripple case, as well as for the future of stablecoins in general. The court will have to decide whether to grant Circle’s motion and what weight to give to its information. The crypto community will have to wait and see how this unexpected twist unfolds.
US Congressman introduces bill to keep centralized records of all off-chain crypto transactions
A new bill introduced by US Congressman Don Beyer aims to regulate the cryptocurrency industry and impose stricter reporting requirements for off-chain transactions. The bill, titled the Digital Asset Market Structure and Investor Protection Act, would create a statutory definition of digital assets and digital asset securities, and establish a framework for their regulation by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
One of the most controversial provisions of the bill is the requirement for any person who engages in a transaction involving a digital asset that is not recorded on a distributed ledger or platform to report such transaction to a registered digital asset trade repository within 24 hours. The bill defines a digital asset trade repository as an entity that collects and maintains information on digital asset transactions and makes it available to regulators and the public.
The bill also requires any person who transfers more than $10,000 worth of digital assets in a single transaction or in aggregate over a one-year period to report such transfers to the Internal Revenue Service (IRS) and the Financial Crimes Enforcement Network (FinCEN). The bill would also subject digital assets to anti-money laundering and countering the financing of terrorism rules and impose sanctions on foreign persons who use digital assets to evade US sanctions or engage in illicit activities.
The bill’s sponsor, Congressman Beyer, said in a press release that the bill “would protect consumers, promote innovation, and ensure that America remains a leader in the digital asset space.” He added that “digital assets and blockchain technology hold great promise, but it is clear that the market needs a legal framework to prevent abuse and ensure that investors are protected.”
However, the bill has also faced criticism from some industry experts and advocates, who argue that it would stifle innovation, impose excessive compliance costs, and infringe on the privacy and autonomy of crypto users. They claim that the bill would create a centralized database of all off-chain crypto transactions, which could be vulnerable to hacking, surveillance, or misuse by authorities. They also contend that the bill would impose unrealistic reporting requirements that would be impossible to comply with for many types of off-chain transactions, such as peer-to-peer transfers, atomic swaps, or transactions involving privacy coins or decentralized exchanges.
Some critics have also questioned the need for such a sweeping regulation of the crypto industry, given that existing laws already cover most aspects of digital asset transactions. They point out that the SEC and the CFTC already have jurisdiction over digital asset securities and derivatives, respectively, and that FinCEN already requires crypto exchanges and custodians to register as money services businesses and comply with anti-money laundering rules. They also note that the IRS already treats digital assets as property for tax purposes, and that crypto users already have to report their gains and losses on their tax returns.
The bill is currently pending before the House Committee on Financial Services, where it will likely face further scrutiny and debate. It is unclear whether it will gain enough support to pass the House, let alone the Senate, where it would need 60 votes to overcome a filibuster. The bill’s fate may also depend on the Biden administration’s stance on crypto regulation, which has yet to be fully articulated.