Binance CEO Changpeng Zhao advised investors to look beyond large stable cryptocurrencies to smaller algorithmic stablecoins to diversify risk.

In an Ask Me Anything (AMA) Q&A session, Changpeng Zhao noted that USDT, the Tether-issued USDT stablecoin, is currently the largest by market capitalization. However, Zhao is cautious about this crypto-asset due to the lack of transparency:

<blockquote.

“Personally, I haven’t seen any audit reports on USDT. I don’t think most people have seen them either. So it’s kind of a black box because we don’t know anything,” Zhao said.

Note that in May 2021, Tether disclosed detailed information about the assets backing USDT stablecoins for the first time in many years. Bits.media previously published a detailed piece on third-party audits for Tether.

Zhao added that even well-regulated and fully vetted stable cryptocurrencies like BUSD come with unforeseen risks. Therefore, investors should pay attention to different algorithmic stablecoins rather than fixating on the most popular giants;

For example, BUSD’s capitalization fell by $5 billion at the beginning of the year. This is due to the New York State Department of Financial Services (NYDFS) requiring Paxos Trust to stop issuing new BUSDs due to security breaches.

<blockquote.

“We have to work with as many stablecoins as possible. You don’t need to bet on any one crypto asset. We have a small team working on algorithmic stablecoins in various places. These stablecoins don’t have a large scale, but they are very relevant locally,” Zhao said.

A Binance executive recently described himself as a strong supporter of bitcoin. Zhao again touched on the topic of decentralization, saying that Binance is committed to supporting different blockchains and cryptocurrencies.

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The U.S. District Court refused to allow Terraform Labs’ lawyers to dismiss the SEC lawsuit

Published: 1 August

Cryptocurrencies

A U.S. district judge has denied a motion by lawyers for Terraform Labs seeking to dismiss a lawsuit by the U.S. Securities and Exchange Commission (SEC) that accused company founder Do Kwon of securities fraud.

In July, lawyers for Terraform Labs challenged the regulator's suit, using the court's reasoning in ruling on the Ripple case. In the Ripple litigation, the court ruled that selling XRP to retail investors did not violate securities laws because users were buying the coins on the secondary market.

However, Judge Jed Rakoff refused to extend that reasoning to the Terraform Labs case. He explained that the Howey test, which determines whether an asset qualifies as a security, does not distinguish between purchasers of. Therefore, the court declined to distinguish between UST steblecoins based on the manner in which they are sold. Rakoff ruled that the TerraUSD stablecoin, which lost its peg to the dollar last year and plummeted in value, wiping out about $40 billion in the market, was a security that should have been registered.

<blockquote.

"Defendants launched a public campaign to induce retail and institutional investors to purchase these cryptoassets by publicizing their profitability. Issuers claimed managerial and technical skills that enabled Defendants to maximize returns on investors' investments. Simply put, buyers in the secondary market had just as good a reason to believe that the defendants would use those investments to make a profit on their behalf," the judge explained.

The court also rejected defense arguments that the SEC lacks the authority to regulate stablecoins without congressional authorization. The court found cryptocurrencies to be a serious enough problem to justify application of the Core Issues Doctrine. The doctrine limits the agency's undue influence on major policy issues, but it does not apply to cryptoasset markets, Rakoff added.

The judge said the SEC provided ample evidence that Terraform and its founder Do Kwon had motives to mislead investors about the utility of UST.

Recall that in April, South Korean law enforcement authorities seized the property of former Terraform Labs employees worth about 200 billion won ($153.6 million).

More information on the portal: https://btcnews.biz/cryptocurrencies/the-u-s-district-court-refused-to-allow-terraform-labs-lawyers-to-dismiss-the-sec-lawsuit/