Terraform Labs and its founder, Do Kwon, are in the crosshairs of the United States Securities and Exchange Commission, prompting mixed reactions from lawyers in the cryptocurrency community.
On February 16, the SEC indicted and filed charges against Kwon and Terraform Labs for the alleged sale of a “pool of crypto asset securities.” While community members aren’t defending Kwon for his actions, they are questioning the way the SEC is going after Terra and its founder.
Mike Selig, a Web 3.0 lawyer, tweeted his take on the matter. According to Selig, the SEC characterizes the algorithmic stablecoin TerraUSD Classic (USTC) as a security because it could be exchanged for Terra (LUNA), now known as Luna Classic (LUNC), which is also a security according to the SEC. Selig explained that, according to this theory, “almost anything can be a value”.
Mike Wawszczak, an attorney for the Alliance DAO, also commented on the issue. According to Wawszczak, SEC Chairman Gary Gensler may want “total discretion” in applying securities laws to any transaction. The lawyer tweeted:
hmm
hard to read the SEC v. TFL complaint and not conclude that Chairman Gensler wants complete discretion to apply securities laws to any transaction he wants.
for that job, he requested $2.2 billion in FY 2023
(for comparison, San Francisco’s budget last year was $13 bil) https://t.co/BlcWyFgp4H
—Mike Wawszczak (@mikedotwaves) February 17, 2023
Justin Browder, a partner at law firm Willkie Farr & Gallagher, likened the SEC’s description of using USTC to generate returns in another protocol to “depositing fiat in a bank.” The lawyer also wondered if there is another non-exchange currency that does not behave like this. In the end, Browder described the SEC’s actions as “insane.”
Aside from lawyers, other members of the crypto community also joined the conversation. dylan daniel believe that if everything becomes a security, the SEC will have to expand and amplify. The Web3 community member hopes that Gensler has a solid plan.
On February 13, similar sentiments were expressed on Twitter when the SEC decided to go after Paxos, claiming that the stablecoin Binance USD (BUSD) is a security. Many community members were confused, arguing that stablecoin users do not buy it and expect its price to rise.
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