US SEC Emerges Victorious in Terraform Labs Case, Raising Concerns Over Stablecoin Classification
A recent ruling by US District Judge Jed Rakoff has caused unease within the cryptocurrency community regarding the classification of stablecoins. The US Securities and Exchange Commission (SEC) emerged victorious in the case against Do Kwon and his company Terraform Labs, who were found to have violated US law by failing to register two digital currencies that eventually collapsed in 2022. The SEC alleged that TerraUSD stablecoin and Luna (LUNC) were involved.
Doubts on Stablecoin’s Security Status
Legal experts, including pro-XRP lawyer Jeremy Hogan, have expressed skepticism about classifying stablecoins as securities. Hogan questions how a stablecoin, typically pegged to a specific value like the US dollar, can be considered a security when it is designed to maintain a stable value and serve as a digital representation of traditional currency.
Hogan references Judge Rakoff’s ruling that states a stablecoin qualifies as a security when it can be staked for a return on investment, regardless of whether investors stake it or not. Hogan also highlights the importance of older individuals in positions of power understanding new technologies like cryptocurrencies.
Ripple Case Contrasted with Terraform Labs Ruling
Ripple’s Chief Legal Officer Stuart Alderoty does not take a firm stance on the Terraform case but criticizes the SEC’s approach of engaging in lengthy litigation on a token-by-token basis. Alderoty believes this pursuit of political power rather than sound policy is misguided. Journalist Eleanor Terret notes a key difference between the Terraform Labs case and the Ripple case regarding establishing an “investment contract” between the companies and retail investors based on the Howey Test.
Hot Take: Implications for Stablecoin Classification
These recent developments have sparked a broader discussion about the classification of stablecoins as securities, the potential impact on the crypto space, and the SEC’s regulatory approach. The outcome of these debates could shape future regulations and policies surrounding cryptocurrencies and their legal classifications.
By
By
By
By