Jeremy Allaire, the CEO of the stablecoin issuer Circle, said in a Thursday interview with Bloomberg that the United States Securities and Exchange Commission (SEC) is not the right regulatory agency to oversee the stablecoin family.

Founded in 2013, Circle has become popularly known as the brains behind the second-largest stablecoin by market capitalization, USDC. The asset, which is a payment stablecoin, keeps a 1:1 peg to the U.S. dollar.

Allaire Considers Banking Regulators as Better Overseers

The Circle co-founder argues that banking regulators should oversee payment stablecoins since they perform the same function as fiat currencies. Allaire likely had the Federal Reserve in mind since they supervise the American banking system.

“I don’t think the SEC is the regulator for stablecoins. There is a reason why everywhere in the world, including the US, the government is specifically saying payment stablecoins are a payment system and banking regulator activity,” he said.

Notwithstanding, Allaire noted his support for a recent move by the SEC to scrutinize crypto custodians. In its proposal, the financial watchdog stated that crypto custodians should subject themselves to annual evaluations and other requirements to prove their liquidity states and become “qualified custodians.” The proposal has yet to be approved and passed as a rule.

U.S. SEC vs. Stablecoins

Since the algorithmic stablecoin TerraUSD (UST) fallout in mid-2022, several financial regulators have probed the stablecoin family. The U.S. SEC has not been left behind as it has expanded its dragnet to include cryptocurrencies, which it considers securities. Its primary job is to oversee the financial securities market.

Last week, the regulatory agency sued Terraform Labs and its founder, Do Kwon, over the UST meltdown. Terraform Labs is the team behind the Terra blockchain and its stablecoin, UST. The SEC said the algorithmic stablecoin was security and should have been registered with the agency.

Earlier this month, the SEC made headlines as it sued the stablecoin issuer, Paxos, over the Binance USD (BUSD). The regulatory watchdog alleged that BUSD was security. Paxos later stated that it would stop issuing the BUSD stablecoin under the direction of another U.S. financial regulator.

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