Efforts by Circle, the issuer of the world’s second-largest stablecoin USDC, to go public through an Initial Public Offering (IPO) have entered into advanced stages. However, these plans might experience a setback. That is because the U.S. Securities and Exchange Commission (SEC) is currently on the case of its USDC stablecoin, where its classification could significantly impact the IPO ambitions.
Potential Implications for Circle USDC
According to a report by Barron’s, which cites SEC documents, the Commission has been having back-and-forth discussions with Circle regarding potential regulatory hurdles. The SEC has raised concerns about whether USDC could be classified as a security, which would subject Circle to stricter regulations and potentially derail its IPO.
USDC would require registration with the SEC if deemed a security, leading to increased operational costs for Circle. That is not to mention that certain businesses may also be restricted from using USDC, impacting its overall utility. As Georgia State University law professor Todd Phillips told Barron’s, “If these things are securities, it becomes more expensive for Circle to operate, if they even can operate.”
Notably, this isn’t the first time Circle has come under SEC’s radar. Their initial IPO attempt in 2022 was also met with regulatory hurdles. Circle remains optimistic about the IPO, hoping it will take place once the SEC completes its review. Despite the positivity, however, the classification of USDC remains a significant cause for concern.
Stablecoin Industry Faces Broader Regulatory Scrutiny
It might be worth noting that the SEC does not have a personal issue to grind with USDC. Other popular stablecoins like PayPal’s PYUSD and Ripple’s upcoming RLUSD are also under watch by the regulator. PayPal confirmed receiving a subpoena from SEC last year, that is related to its PYUSD. Ripple’s XRP token, on the other hand, is already embroiled in a largely publicised legal battle with the SEC regarding its classification as a security. Although Ripple plans to debut its stablecoin on XRPL and Ethereum, the SEC does not exactly trust the firm to do things in order given their long history.
