Venture capital firm Paradigm has criticized the US Securities and Exchange Commission (SEC) for circumventing standard regulatory procedures in its current legal action against cryptocurrency exchange Binance.
in a statement Published on Friday, September 29, Paradigm stated that the SEC is attempting to use the allegations in its complaint to alter the law without adhering to the established rulemaking process. Paradigm strongly believes that the SEC is overstepping its regulatory boundaries and further stated that it strongly opposes this tactic.
In June, the SEC initiated legal action against Binance. accusing him of multiple violations of securities laws, such as operating without the necessary registration as an exchange, stockbroker or clearing agency. Paradigm also highlighted that the SEC has been pursuing similar cases against several cryptocurrency exchanges lately and expressed apprehension that the SEC's stance "could fundamentally reshape our understanding of securities law in several critical respects."
Additionally, Paradigm highlighted concerns regarding deficiencies in the SEC's application of the Howey test. The SEC often relies on the Howey test (which originated in a 1946 U.S. Supreme Court case involving citrus groves) to determine whether transactions meet the criteria for investment contracts and are subject to securities regulations.
In its amicus curiae brief, Paradigm he claimed that many assets are actively traded, bought and traded based on their earnings prospects. However, the SEC has consistently exempted them from being classified as securities. The brief also points out cases such as gold, silver and fine arts, emphasizing that simply having the potential for value appreciation does not inherently classify its sale as a securities transaction.
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USD currency (USDC) issuer Circle has recently become a party to the ongoing legal dispute between Binance and the SEC. Circle believes that the SEC should not classify stablecoins as securities.
Circle argues that these assets should not be classified as securities because people who acquire stablecoins do not do so to make a profit.
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