SEC Lawsuit against Terraform Labs and its Co-Founder Do Kwon Viewed as a Roadmap to Ban Other Stable Currencies

02/17/2023 06:53 • Metaverse Matters • 152 views

It is reported that Gabriel Shapiro, the general counsel of Delphi Labs, said on Twitter that the lawsuit of the United States Securities and Exchange Commission (SEC) against Terraform Labs and its co-founder Do Kwon could be regarded as the “road map” of the SEC to ban other stable currencies. Shapiro said that the SEC’s argument in the lawsuit was “more thorough than usual”. The SEC’s lawsuit has four firsts: 1. It claims that the stable currency (UST) is a security; 2. It is claimed that the synthetic stock (mAsset) is a (security) swap; 3. Claim that “Encapsulated Token” (wLUNA) is a kind of security. 4. The Howey test is not used for tokens, but the argument of “enumerating securities” is used to support its view that wLUNA is the “receipt” of securities and therefore the securities.

Lawyer: The SEC’s lawsuit against Terra can be seen as the “road map” for the SEC to ban other stable currencies

Interpret the above information:

Gabriel Shapiro, the general counsel of Delphi Labs, stated on Twitter that the lawsuit filed by the United States Securities and Exchange Commission (SEC) against Terraform Labs and its co-founder Do Kwon could serve as a roadmap for the SEC to ban other stable currencies. Shapiro noted that the SEC’s argument in the lawsuit was more thorough than usual. This statement raises concerns among investors and regulators alike about the possible regulatory crackdown on stable currencies.

The lawsuit filed by the SEC against Terraform Labs and its co-founder Do Kwon is significant for several reasons. Firstly, the SEC claims that the stable currency (UST) is a security. This means that other stable currencies may also be subject to the same classification in the future. Secondly, the SEC has claimed that the synthetic stock (mAsset) is a security swap. This move could trigger similar actions by the SEC against other types of digital assets that are not explicitly regulated. Thirdly, the SEC claims that “Encapsulated Token” (wLUNA) is a type of security. This argument is particularly worrying for investors who hold different types of digital assets.

Lastly, the SEC has stated that the Howey test, which is commonly used to determine whether a particular transaction constitutes a security, is not applicable to tokens. Instead, the SEC has used the argument of “enumerating securities” to support its view that wLUNA is a “receipt” of securities, and therefore, a security itself. This is a novel approach to determining the security status of digital assets and could have significant implications for the entire cryptocurrency market.

In conclusion, the SEC’s lawsuit against Terraform Labs and Do Kwon is viewed by Gabriel Shapiro as a roadmap to ban other stable currencies. The SEC’s argument that the stable currency (UST) is a security, along with its use of “enumerating securities” to classify digital assets as securities, could have far-reaching consequences for the cryptocurrency market. Investors and regulators should pay close attention to the developments in this lawsuit as it could shape the regulatory framework for digital assets in the future.

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