Sam Boughedda

Bloomberg reports that the US Securities and Exchange Commission is looking into whether the marketing of stablecoins violated federal investor protection regulations.

Bloomberg, citing a person who is familiar with this matter, stated that the SEC is investigating whether Terraform Labs (the company behind UST) has defied securities and investment product rules.

Stablecoins can be referred to as cryptocurrencies which are tied or pegged to currencies, commodities or other financial instruments.

UST was linked to the dollar. It was supposed to have a 1-to-1 peg with the currency through an algorithm and trade in, a related token.

In May, the UST crashed. Janet Yellen, Treasury Secretary, stated that the collapse of the UST “illustrates how this product is rapidly growing, and that there may be risks to financial stability. We need a framework that’s suitable.” Later, she added that it would be appropriate to pass legislation this year to regulate crypto markets.

Do Kwon (Terraform’s Chief Executive Officer) has come under heavy scrutiny. This will continue, with the SEC investigation only increasing the pressure. Bloomberg stressed however that neither Terraform, nor Kwon has been charged with any wrongdoing regarding UST.

In a statement to Bloomberg, Kwon said they aren’t “aware of any SEC probes into TerraUSD at this time – we’ve received no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol.”

Mirror Protocol is being investigated by the SEC. It’s believed that Terraform and Kwon have sold unregistered securities through it. The Protocol permits users to trade crypto tokens representing popular stocks, such as Apple (NASDAQ;) and Amazon.