By Sam Boughedda
According to a report by Bloomberg Thursday, the US Securities and Exchange Commission (SEC) is investigating whether, before it crashed, the TerraUSD stablecoin marketing infringed federal investor-protection regulations.
Bloomberg, citing a person familiar with the matter, explained that the SEC is probing whether Terraform Labs, the company behind UST, defied the rules for securities and investment products.
Stablecoins are cryptocurrencies that are pegged or tied to other currencies, commodities, or financial instruments.
UST was tied to the dollar and supposed to hold a 1-to-1 peg to the currency via an algorithm and trading in Luna, a connected token.
The UST collapsed in May. Following the implosion, Treasury Secretary Janet Yellen said it "illustrates that this is a rapidly growing product, and that there are risks to financial stability, and we need a framework that's appropriate," later adding that legislation to address regulation in crypto markets would be "appropriate" this year.
Terraform and its Chief Executive Officer Do Kwon have faced heavy scrutiny, and the SEC investigation will only increase the pressure. However, Bloomberg stressed that neither Terraform nor Kwon have been accused of any wrongdoing related to 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 under investigation by the SEC on suspicion that Terraform and Kwon sold unregistered securities through the Protocol, which allows users to trade crypto tokens representing popular stocks like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).