By Sam Boughedda
According to a Bloomberg report on Thursday, the US Securities and Exchange Commission (SEC) is investigating whether, prior to its collapse, the stablecoin’s commercialization violated federal investor protection rules.
Bloomberg, citing a person familiar with the matter, says the SEC is investigating whether Terraform Labs, the company behind UST, defied securities and investment product rules.
Stable currencies are cryptocurrencies that are pegged or linked to other currencies, commodities or financial instruments.
The UST was pegged to the dollar and supposed to maintain a 1-to-1 peg to the currency through an algorithm and trades in , a connected token.
The UST collapsed in May. Following the implosion, Treasury Secretary Janet Yellen said it “illustrates that this is a fast-growing product, and there are risks to financial stability, and that we need a proper framework,” later adding that legislation to regulate crypto markets would be “appropriate” this year.
Terraform and its CEO Do Kwon have come under intense scrutiny, and the SEC investigation will only add to the pressure. However, Bloomberg pointed out that neither Terraform nor Kwon have been accused of any wrongdoing related to UST.
In a statement to Bloomberg, Kwon said they were “not aware of any SEC investigation into TerraUSD at this time – we have not received any such communication from the SEC and are not aware of any new investigations beyond the one involving Mirror Protocol.”
Mirror Protocol is the subject of an SEC investigation that suspects Terraform and Kwon of selling unregistered securities through the protocol, which allows users to trade cryptocurrency tokens representing popular stocks like Apple (NASDAQ:) and Amazon (NASDAQ:).