Stable Coin and the SEC
Comment of the Day

May 18 2022

Commentary by Eoin Treacy

Stable Coin and the SEC

Thanks to a subscriber for this report from RenMac which may be of interest. Here is a section:

Current-SEC Chair Gary Gensler cuts this gordian knot by making the obvious remark that asset-backed stable coins are repackaging the securities held in the reserve, and so are derivatives hence themselves securities: ‘Make no mistake: It doesn't matter whether it's a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities ...these platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime.’

In the way of the Terra/Luna collapse, he reiterated this conviction today: ‘there’s a need to bring greater investor protection to these crypto markets ... central to that are crypto trading and lending platforms, where investors buy, sell and lend around $100 billion of crypto assets a day. The crypto-related events in recent weeks have highlighted yet again how important it is to protect investors in this highly speculative asset class.’

Eoin Treacy's view

The abrupt collapse of a $60 billion stablecoin has raised eyebrows. There has been a lot of discussion about how and whether to regulate the sector, but the size of the market and the potential for significant losses by retail investors is creating urgency. Regulation of crypto securities is inevitable. Jurisdiction is irrelevant if a country’s own citizens can purchase. That also suggests full transparency on where deposits are being invested is inevitable.

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