Breaking news today shows Circle, promoter of the USD Coin stablecoin, being issued a mysterious subpoena by the SEC.
“Circle … said in regulatory filings that it received an ‘investigative subpoena’ from the SEC’s Enforcement Division in July 2021,” writes Danny Nelson at Coindesk. “That subpoena requests ‘documents and information regarding certain of our holdings, customer programs, and operations,’ the filing said.”
There is no official word on what this investigative activity is focused on. However, the company has recently announced a proposed crypto yield product called Circle Yield, which is assumedly rather like lending products proposed by Coinbase and others – specifically the Coinbase Lend product – that have also generated SEC activity. A more direct way to say that is that after Coinbase announced the project months ago, the SEC threatened to sue if Lend even saw the light of day. And that was it for Lend.
Then again, the subpoena could also be around USDC stablecoin itself. With SEC Chairman Gary Gensler referring to some stablecoins and crypto tokens as “securities,” based on esoteric parsing of utility and brand contract, there is every reason to expect broader enforcement on a wide range of financial products in the blockchain space.
It’s not a great time for a legal challenge, as Circle prepares to go public with a $4.5 billion deal with Concorde Acquisitions, a deal characterized as an SPAC merger.
Meanwhile, in a press release, Circle indicated that the first user base for its Circle Yield product would be limited to U.S. and Swiss investors. Losing more than half of that audience with legal challenges in the United States could be damaging for Circle.
“Regulated by the Bermuda Monetary Authority (BMA), this solution builds on Bermuda’s long-standing leadership and reputation in organizing institutional capital,” Circle spokespersons write. “Under Circle’s Class F (“Full”) DABA license, which was first granted in 2019, the expansion of BMA oversight to include the newly launched high yield offering represents an important expansion of Circle’s products, as well as of the types of institutional capital formation now possible in Bermuda.”
Well, it might have approval in Bermuda, but pay attention to what U.S. regulators do.