Paradigm, a crypto venture capital firm, has criticized the United States Securities and Exchange Commission (SEC) for bypassing the standard rulemaking procedures in their current legal action against the cryptocurrency exchange Binance.
In a statement released on Friday, Sept. 29, Paradigm pointed out that the SEC is attempting to use the concerning accusations in its complaint as a means to alter the law, all without adhering to the established rulemaking process. Paradigm firmly believes that the SEC is exceeding its regulatory boundaries, and we strongly oppose this tactic, they further stated.
Back in June, the SEC initiated a legal action against Binance, accusing them of multiple violations of securities laws, such as operating without the necessary registration as an exchange, broker-dealer, or clearing agency. Paradigm also underscored that the SEC has been pursuing similar cases against various cryptocurrency exchanges lately and voiced apprehension that the SEC’s stance “could fundamentally reshape our comprehension of securities law in several critical aspects.”
Screenshot of Paradigm’s amicus brief Source: Paradigm
Additionally, Paradigm highlighted concerns regarding the shortcomings of the SEC’s application of the Howey Test. The SEC often relies on the Howey Test, originating from a 1946 U.S. Supreme Court case involving citrus groves, as a means to determine whether transactions meet the criteria for investment contracts and, thus, fall under securities regulations.
In its amicus brief, Paradigm asserted that many assets are actively marketed, purchased, and traded based on their profit prospects. Nevertheless, the SEC has consistently exempted them from being classified as securities. The brief further pointed out instances such as gold, silver and fine art, underscoring that merely having the potential for value appreciation does not inherently classify their sale as a security transaction.
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Circle, the issuer of the USDC Stablecoin, has recently become a participant in the ongoing legal dispute between Binance and the SEC. Circle holds the view that the US SEC should not categorize stablecoins, including BUSD and USDC, as securities.
Circle contends that these assets ought not to be categorized as securities, primarily due to the fact that individuals acquiring these stablecoins do not foresee deriving profits solely from their acquisition.
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Source: https://cointelegraph.com/news/paradigm-accuses-sec-of-bypassing-rules-in-binance-lawsuit
