Journalist
Published:
- SEC demands FTX repayments in stablecoins, sparking criticism from industry
- Gensler’s regulatory approach faces backlash over concerns about its future influence.
In its recent filing, the U.S. Securities and Exchange Commission (SEC) issued a stern warning to bankrupt cryptocurrency exchange FTX regarding reimbursing victims, insisting on the use of stablecoins or other crypto assets.
Coinbase CLO criticizes SEC
The move drew criticism from various executives, including Coinbase Chief Legal Officer Paul Grewal, who accused the SEC of deliberately fostering uncertainty in the cryptocurrency regulatory landscape.
Speaking to X (formerly Twitter), Grewal noted:
Source: Paul Grewal/X
He also highlighted the agency’s refusal to clarify the legality of the transactions concerned and said:
“Why bring clarity to the market when threats and slander are enough?”
Expressing his frustration over this, he added:
“Investors, consumers and markets deserve better. Much better.”
What happened so far?
To put things into context, in an August 30 filing with the U.S. Bankruptcy Court in Delaware, SEC lawyers said that while repayments to creditors using stablecoins are not entirely illegal,
However, the SEC reserves the right to challenge such payments if they involve crypto assets pegged to the U.S. dollar.
Source: US SEC
Needless to say, following its collapse in November 2022, FTX explored various strategies to address creditor claims, including a now-abandoned proposal to relaunch the exchange.
Although many creditors have advocated for in-kind repayments, FTX’s latest liquidation plan chose to settle claims in U.S. dollars.
The crypto community against the SEC?
As expected, Grewal wasn’t alone in criticizing the company: the broader crypto community has widely condemned the SEC’s stance.
Alex Thorn, head of research at Galaxy Digital, echoed Grewal’s concerns, adding that the SEC’s actions continue to create confusion and uncertainty in the industry.
“This is the height of abuse of jurisdiction.”
He further added:
“The SEC isn’t even making a case here. They just won’t let this go. It’s a club they have to keep sharp, lest legitimate actors deign to use these (boringly transparent) instruments.”
Gensler’s Cryptographic Approach in Question
The situation highlights lingering concerns about the SEC’s regulatory approach under Chairman Gary Gensler.
Known for his skeptical stance on cryptocurrency, Gensler’s tenure has been marked by aggressive regulatory measures that some see as excessive.
However, recent reports suggest that if Vice President Kamala Harris wins the presidency next November, Gensler could be nominated to serve as Treasury Secretary.
This potentially amplifies its influence over financial regulation, further impacting the crypto sector.
It remains to be seen whether the SEC will continue with Gensler amid growing criticism from the crypto community or opt for a new direction.
