SEC Investigates TerraUSD Marketing

The U.S. Securities and Exchange Commission (SEC) is looking into the collapse of the TerraUSD stablecoin and whether its marketing violated federal investor protection regulations, a report from Bloomberg said Thursday (June 9).

The lawyers for the SEC are seeing whether Terraform Labs, which is behind the coin, broke the rules for securities and investment products.

The UST coin, which collapsed last month and caused a good deal of trouble for the whole cryptocurrency ecosystem, was supposed to have a 1-to-1 peg with the U.S. dollar, which involved an algorithm and trading the Luna token, related to UST.

There could be more pressure now on Terraform and its CEO, Do Kwon. Both have already been facing scrutiny from the SEC over the Mirror Protocol, another crypto project letting people trade digital assets tracking the price of U.S. stocks — though neither Terraform nor Kwon have been accused of wrongdoing.

The implosion of the coin beginning May 7 disturbed many officials, including Treasury Secretary Janet Yellen, who said it demonstrated the risks for tokens supposedly pegged to the dollar.

Terraform said it wasn’t aware of any SEC investigation, and that they had received “no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol,” according to Kwon.

See also: In US First, NY Requires Stablecoins to Be Backed by Cash

The fallout from the UST collapse has led New York to be the first state to put a regulatory framework in place for stablecoins, PYMNTS wrote.

According to New York State Department of Financial Services (DFS) Superintendent Adrienne Harris, the agency put guidance for “clear criteria for virtual currency companies looking to issue USD-backed stablecoins in New York.”

Stablecoins issued in New York have to be 100% backed by reserves of dollars and four different types of treasuries. They’d also have to have the reserves audited monthly and be redeemable on demand.