Circle itself, in partnership with Coinbase, is also the issuer of one of the market's largest USD Coin (USDC) stackcoins. The comments about Paxos are relevant because the SEC is about to take legal action against the company, because it considers its Stablecoin to be a security. In Allaire's view, it's not the Commission's job to classify coins at all - that's a task for a regulator with a different profile.

It should be noted that the participation of Circle representatives in such discussions is quite amusing. Still, as sources earlier clarified, it was Circle employees who told the regulator about possible problems with the Binance exchange and the BUSD stabelcoin. They said that the largest cryptocurrency exchange might not have enough asset reserves to secure the stakes – which provoked the regulators’ interest.

What’s more, it happened in the autumn of 2022. That’s when Binance activated the automatic translation of USDC staple to BUSD on transactions. In this regard, there is a belief in the blockchain community that the problems for BUSD, Binance and Paxos by Circle representatives were created as revenge.

How digital assets should be regulated

Traditional Stablecoins backed by the US dollar are not the concern of the US Securities and Exchange Commission. This is addressed in the following quote from Allaire in the interview.

I don’t think the Commission is the right regulator for stabelcoins. There’s a reason why all over the world, and including the US, governments emphasise that Stablecoins are a payment system and an activity within a banking regulator.

It is important to note that pegging stablcoins to the dollar does not mean they are fully backed by that currency. Initially, companies like Tether and Circle did hold dollars as collateral in their bank accounts, but they were eventually replaced by "assets of equivalent value". Consequently, the stabelcoins are now predominantly backed by alternative instruments. In the case of USDC, a similar change occurred in the summer of 2021.

According to Cointelegraph sources, there was also a lot of buzz around Circle last week – it was all about a now deleted tweet by Fox Business reporter Eleanor Terrett. She started a rumour that not only Paxos, but also Circle was allegedly in the SEC’s crosshairs. The rumours were quickly refuted by Circle Pay’s director of strategy and head of global policy Dante Disparte. He stated that his company had not received a notification from the Commission.

Unfortunately, the regulator’s actions have managed to damage BUSD: due to the negative news, the stabilitycoin’s capitalisation has started to decline rapidly. Holders of BUSD have predictably decided to get rid of the coin in favor of steibles, which, at least for now, have no problems with the Securities and Exchange Commission and other regulators.

Requests from the Commission came to Circle back in 2021 as part of standard practices. They related to the topics of reserve disclosure, the token issuance process and so on. In all of its inspections, the Commission had no complaints against the company, unlike Paxos.

Aller also noted the peculiarities of the stabelcoin sphere itself within the crypto market. He continues.

“There are no mates for taste or colour. Not all staplecoins are created equal. But it is clear that from a political point of view there is a consensus worldwide – it is a payment system and a space for the relevant regulator to act.

This sounds logical, because it is hard to apply the concept of securities to the concept of stablcoins. The tokens themselves are a payment instrument and a medium of exchange, as no one buys them in an attempt to make money. Consequently, their control should be in the hands of bodies that are familiar with the specifics of banking sector regulation. And the Commission’s attempts to see all instruments as securities will not do any good, at least in the context of the popularity of the US among cryptocurrency entrepreneurs.

The SEC’s actions have even been criticised by the regulator’s spokeswoman, Commissioner Hester Pearce. She supported the cryptocurrency companies in their quest for fairer and more thoughtful oversight of the industry. Jeremy Allaire agrees with her view and believes that the US Congress should step in before the Commission’s leadership takes on too much power.


We think the SEC has really taken too much of a proactive approach to the digital asset industry. Whether such nagging and fines for blockchain companies make sense is unknown. Still, cryptocurrencies are now gradually being treated more warmly even in China, so US regulators clearly need to think about their actions. Obviously, such a stance could lead to an outflow of human capital, and already in the near future.


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