​Circle CEO criticizes the SEC’s role in regulating stablecoins

The US Securities and Exchange Commission is not the right regulator for stablecoins, according to Jeremy Allaire, the chief executive and founder of Circle Internet Financial Ltd.

The Boston-based firm is the issuer of the second-largest stablecoin, USD Coin, with over $42 billion in circulation. Stablecoins usually aim to maintain a one-to-one ratio with key assets such as the dollar by holding comparable reserves, and act as a crucial medium between the traditional financial system and digital assets. The tokens are used to facilitate trades, exchange assets between blockchains and serve as a haven from the volatile price swings that hit cryptocurrencies, hence the stablecoin name.

“I don’t think the SEC is the regulator for stablecoins,” Allaire said in a Bloomberg interview. “There is a reason why everywhere in the world, including the US, the government is specifically saying payment stablecoins are a payment system and banking regulator activity.”

The main US regulator for the securities industry has tightened rules over crypto firms from exchanges, custodians and stablecoins after a series of meltdowns in the industry last year, including the algorithmic stablecoin TerraUSD. Meanwhile, the New York State Department of Financial Services ordered Paxos Trust Co. last week to stop minting Binance USD, the third-largest stablecoin, because of its relationship with exchange giant Binance. Tether is the largest stablecoin issuer.

SEC Chair Gary Gensler has turned up the spotlight on the stablecoin sector, even raising the specter that the tokens could be considered securities, making them subject to the agency’s registration and discloser requirements, as well as its oversight.

Circle noted last week that it hadn’t received a so-called Wells notice from the SEC in the wake of the Paxos clampdown. Paxos had acknowledged it received a Wells warning. The letter is typically sent by a securities regulator to companies that could face charges. Circle disclosed in July 2021 it had received a subpoena from the SEC which requested documents and information regarding its certain holdings, customer programs and operations.

“There are lots of flavors, as we like to say, not all stablecoins are created equal,” Allaire said. “But, clearly, from a policy perspective, the uniform view around the world is this is a payment system, prudential regulator space.”

This material is taken from the website https://www.bloomberg.com.