Circle CEO says stablecoin regulation should not be assigned to U.S. SEC

Circle CEO Jeremy Allaire told Bloomberg on Feb. 23 that the U.S. Securities and Exchange Commission should not be tasked with regulating stablecoins.

Allaire said during an interview with the publication:

“I don’t think the SEC is the regulator for stablecoins. There is a reason why … [governments are] specifically saying payment stablecoins are a payment system and banking regulator activity.”

He added that there are many variants of stablecoins and that “not all … are created equal.” However, he maintained that most regulators consider stablecoins a payment system. That statement implicitly excludes stablecoins from being classified as securities.

Allaire also said that he favors separate SEC regulations that could impose stricter rules around cryptocurrency custody. In line with support expressed by other companies last week, the Circle CEO said today that rules for qualified custodians would provide “appropriate” controls and protection against bankruptcy. He stated:

“We have seen a lot of lessons learned [when] random exchanges have your assets. There is a reason why you have that kind of [custodial] rule.”

Allaire’s statements come shortly after high-profile SEC actions against stablecoins. On Feb. 13, Paxos stated that it would stop issuing Binance USD (BUSD) at the request of New York regulators. The SEC then separately sent a Wells notice to Paxos. Rumors soon emerged that Circle had received a similar notice ⁠— rumors that Circle firmly denied.

The SEC additionally took action against the TerraUSD stablecoin and associated assets on Feb. 16. TerraUSD’s value was determined algorithmically by crypto assets, and it lost most of its value in May 2022. Binance USD and Circle’s own USD Coin (USDC), by contrast, are backed by traditional assets and maintain their $1.00 price peg.

SEC chair Gary Gensler has repeatedly suggested that stablecoins could come under the regulator’s jurisdiction. Last September, he suggested that stablecoins are similar to certain securities. He also compared stablecoins to poker chips in late 2021.

Circle’s USDC stablecoin currently has a market cap of $42 billion. It is the second largest stablecoin after Tether’s USDT, with a market cap of $70 billion.