Stablecoins bear the brunt of the latest SEC measures. However, the new investigation of the latter could definitively bury them.
As cryptocurrencies struggle to recover from the BUSD ban, the SEC is facing a new victim: Do Kwon’s USTC. However, when analyzing the press release of the financial authority, it can be assumed that the latter has a very disastrous project for stablecoins.
A New Stablecoin in the SEC’s Sights
After the end of the issuance of BUSD, the crypto sphere fears more and more new sanctions against stablecoins, even their ban. Unfortunately, the SEC may take action soon.
Despite its actions being questioned by the United States Senate, the financial authority continues to hunt down the darkest corners of cryptocurrencies. This time, it faces the famous creator of Terra, Do Kwon. In a statement released on February 16, the SEC accuses the businessman of orchestrating large-scale fraud through its famous stablecoin, USTC.
Unsurprisingly, Do Kwon is also accused of selling unregistered securities to his investors, and of having abandoned them once he pocketed the multi-billion-dollar jackpot.
The U.S. Securities and Exchange Commission tweet reads like follows:
“Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.”
Unlike Ripple or Coinbase, for which the security title is not applicable according to the Howey test, Do Kwon would have promised his community high returns in the long term. Therefore, the SEC plans to investigate the entire system surrounding the USTC. They will not hesitate to develop the necessary rules to prevent such an incident from happening again.
Death of Stablecoins Soon?
By investigating a new stablecoin, the SEC seems to be starting a long list of investigations into these tokens. Therefore, there is no immunity against USDC or Tether getting hit on the fingers as well.
This is not good news for stablecoins, says Gabriel Shapiro, general counsel at investment firm Delphi Labs. In fact, depending on the findings of the Do Kwon investigation, the SEC could regulate or even ban the issuance, promotion, trading or even the construction of ecosystems linked to these tokens.
Shapiro tweeted the following:
for UST, the SEC also provides an alternative, non-Howey-based argument, that UST are “rights to subscribe” to a security (LUNA) and thus are themselves securities–again, this is an “enumerated security” type of argument (like the one for LUNA) that does not rely on the Howey.”
In the event of an SEC victory, new restrictions, or even the demise of stablecoins, are expected. The moral of the story: between death and restriction, stablecoins could choose death without hesitation.
By Audy Castaneda
