Journalist
Posted:
- SEC demands FTX refunds in stablecoins, prompting industry criticism.
- Gensler’s regulatory approach is facing backlash over concerns about future influence.
In its recent filing, the US Securities and Exchange Commission (SEC) issued a stern warning to bankrupt crypto exchange FTX regarding victim reimbursement, urging the use of stablecoins or other crypto assets.
Coinbase CLO Rejects SEC
The move has drawn criticism from several executives, including Coinbase Chief Legal Officer Paul Grewal, who has accused the SEC of deliberately promoting uncertainty in the crypto regulatory landscape.
On X (formerly Twitter), Grewal noted:
Source: Paul Grewal/X
He too marked the agency’s refusal to clarify the legality of the transactions involved, saying:
“Why provide clarity to the market when threats and slander are sufficient?”
He expressed his frustration over this issue, adding:
“Investors, consumers and markets deserve better. Much better.”
What has happened so far?
For context, in a filing dated August 30 with the United States Bankruptcy Court in Delaware, SEC lawyers stated that refunds to creditors using stablecoins are not outright illegal.
However, the SEC retains the ability to challenge such payments when dealing with U.S. dollar-linked crypto assets.
Source: US SEC
Naturally, following the collapse in November 2022, the FTX explored various strategies to address creditors’ claims, including a now-abandoned proposal to relaunch the exchange.
Despite many creditors calling for in-kind reimbursement, FTX’s latest liquidation plan has opted to settle claims with US dollars.
Crypto community against SEC?
As expected, Grewal was not alone in his criticism; the broader crypto community has largely condemned the SEC’s stance.
Alex Doornhead 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 jurisdictional overreach.”
He added:
“The SEC isn’t even advocating for this. they’re just not willing to let it go. it is a cudgel they must keep sharp, lest any legitimate actor deign to wield these (boringly excessive) tools.
Gensler’s crypto approach in question
This situation underscores ongoing concerns about the SEC’s regulatory approach under Chairman Gary Gensler.
Known for his skeptical stance toward cryptocurrency, Gensler’s tenure was marked by aggressive regulatory measures that some consider excessive.
However, recently reports suggest that if Vice President Kamala Harris becomes president in November, Gensler could be nominated as Treasury Secretary.
This potentially increases its influence on financial regulations, further impacting the crypto sector.
It remains to be seen whether the SEC will move forward with Gensler amid mounting criticism from the crypto community, or opt for new leadership.
