Feb 18, 2023
SEC Accused of Wildly Applying Securities Laws to Crypto
Do Kwon and Terraform Labs have recently come under fire from the United States Securities and Exchange Commission (SEC), with the agency accusing the crypto asset firm of selling a “suite of crypto asset securities”. The crypto community is up in arms about the SEC’s decision and the manner in which it is going after Terra and its founder.
Web3 lawyer Mike Selig took to Twitter to express his thoughts on the matter. He pointed out that the SEC is characterizing the algorithmic stablecoin TerraUSD Classic (USTC) as a security because it can be exchanged for Terra (LUNA), now known as Luna Classic (LUNC), which the SEC also considers a security. According to Selig, this means that “nearly anything can be a security.”
The general counsel for Alliance DAO, Mike Wawszczak, also commented on the issue, suggesting that SEC Chairperson Gary Gensler may want “complete discretion” in applying securities laws to any transactions. He also noted that Gensler requested $2.2 billion in FY 2023 to do this job, which is considerably more than the $13 billion San Francisco’s budget was last year.
Justin Browder, a partner at the law firm Willkie Farr & Gallagher, compared the SEC’s description of USTC’s use to generate returns on another protocol to “depositing fiat in a bank”. The lawyer questioned whether there is another non-security currency that does not behave like that and described the SEC’s actions as “wild”.
Other members of the crypto community also joined in on the conversation. Dylan Daniel believes that if everything becomes a security, the SEC will have to expand and scale itself, and he hopes that Gensler has a solid plan.
The SEC’s decision to go after Paxos and its Binance USD (BUSD) stablecoin on Feb. 13 also sparked confusion among the crypto community, with many arguing that users of the stablecoin do not purchase it expecting its price to go up.
As the SEC continues to clamp down on crypto asset firms, the crypto community is growing increasingly concerned about the implications for the web3 space. The SEC’s actions have also raised questions about the future of NFTs and NFT marketing. It is clear that the SEC is taking a hard stance on crypto assets, and this could have a significant effect on the industry.
The SEC’s actions could make it more difficult for businesses to promote their NFTs and sell them, as well as make it harder for NFT marketing agencies to operate. Twitter NFT marketing could also be affected, as the SEC’s actions could make it more difficult to advertise NFTs on the platform.
At the same time, the SEC’s actions could also be an opportunity for web3 agencies to step up and offer their services to crypto asset firms. These agencies could help crypto asset firms navigate the SEC’s regulations and ensure that their activities are compliant with the law.
Ultimately, it is clear that the SEC’s actions have left the crypto community with a lot of questions and uncertainty. It remains to be seen how the SEC’s stance on crypto assets will affect the web3 space, but it is clear that the SEC is taking a hard line on the matter.
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