The SEC's next target could potentially be stablecoins, as they have previously encountered issues with stablecoins and their issuers. On June 15, the SEC once again came into the spotlight regarding the depegging of stablecoins. Particularly, concerns about the depegging of Tether (USDT), which represents 76% of the stablecoin market, could prompt a swift reaction from the SEC. What is the current status of the SEC's involvement in the crypto industry and its connections to stablecoins?
The SEC's Authority
With the collapse of the FTX and Terra ecosystems, the SEC has been intensifying its pressure on the cryptocurrency sector, instilling fear particularly with its recent sanctions. On June 6, the SEC announced its lawsuit against Coinbase, one of the leading cryptocurrency exchanges, which had negative implications for cryptocurrencies and exchanges as a whole. The following day, the SEC filed a lawsuit against Binance, further tightening its grip on the market.
In the lawsuit against Coinbase, the SEC stated that Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS), Coti (COTI), BNB, and BUSD were considered securities. This triggered a significant selling pressure on altcoins. The inclusion of BUSD, a stablecoin, in the list may signal the SEC's stance towards stablecoins.
Investors, who have been exiting both altcoins and cryptocurrency exchanges, have now raised concerns about the depegging issues in stablecoins. The SEC, which has had a strained relationship with the crypto industry for a while, is unlikely to turn a blind eye to the problems in stablecoins. Therefore, it appears highly probable that stablecoins will be the next target of the SEC.
Signals Against Stablecoins
The aggressive statements made by SEC Chairman Gary Gensler in the past regarding the crypto industry have come to mind again in light of the recent chaotic environment. Gensler drew comparisons between stablecoins and cryptocurrencies, stating that "Stablecoins are akin to poker chips in a casino. Cryptocurrencies are highly speculative assets. Satoshi Nakamoto wanted to bring finance together with new technology, but this cannot progress without regulation."
SEC, which opposes any form of dominance in the industry, has filed a lawsuit against Binance and classified its stablecoin BUSD as a security. Considering the lack of regulatory oversight on Tether (USDT), which constitutes 76% of the stablecoin market, it opens up the possibility of a potential SEC battle. While the issuer of the stablecoin claims to have a one-to-one backing of each USDT token with a U.S. dollar, there are concerns about whether this is actually true.
SEC previously filed a lawsuit against Paxos, the issuer behind Pax Dollar (USDP) and BUSD tokens, and issued a Wells Notice. The Wells Notice is a notification used by the regulatory body to inform companies about planned enforcement actions. Evaluating SEC's recent aggressive moves, it indicates signs that stablecoins could be the next target.
War Preparation of Stablecoins
USDT's notable data and the emergence of FUD (Fear, Uncertainty, and Doubt) news may have caused market fluctuations, but Tether's CEO Paolo Ardoino's strong stance and efforts to maintain investor confidence continue to create a positive sentiment around Tether. Ardoino is giving a warning against manipulative attacks during this period when the market is experiencing low volume and pessimism.
Ardoino stated that Tether is prepared for any price movements and will take necessary steps. He also expressed a firm stance towards investors converting USDT to USDC, stating that they are ready for redemption. In the past, Ardoino made the following statement:
"Today's numbers show that people want access to financial freedom, and when they are given that access, they will use it. Tether tokens provide a safe haven for those without access and allow them to preserve their purchasing power even when their currencies are being devalued."
By emphasizing his trust in stablecoins through Tether, Ardoino aims to protect market confidence by taking measures against manipulative transactions and assures investors that the expected steps will be taken.
Jeremy Allaire, the CEO and co-founder of Circle, the issuer of USDC, responded to the targeting of stablecoins and the recent depeg allegations on social media. Allaire stated that there is no cause for concern and highlighted the critical role of stablecoins in the industry, emphasizing the need to protect them.