The securities regulator doesn’t want creditors to be paid in stablecoins
The US Securities and Exchange Commission (SEC) has raised concerns about FTX’s proposed payout plan for its creditors, indicating that it might take legal action to prevent certain aspects of the plan. The regulator specifically highlighted its reservations about FTX’s intention to repay creditors using stablecoins, cryptocurrencies pegged to the US dollar.
In a filing on August 30 to the US Bankruptcy Court in Delaware, SEC lawyers acknowledged that while these stablecoin-based repayments may not be inherently illegal, the agency retains the right to challenge them. This move follows the collapse of FTX in November 2022, after which the exchange explored various methods to compensate creditors. Among these methods was a plan to reboot the exchange, which has since been abandoned.
FTX’s current liquidation strategy involves repaying creditors based on the US dollar value of their assets at the time of the bankruptcy filing. Creditors could receive these payments either in cash or in stablecoins. However, the SEC’s filing noted that the plan had yet to identify a “distribution agent” responsible for managing the disbursements.
The SEC’s position has sparked criticism from some in the crypto community. For example, Alex Thorn, head of research at Galaxy Digital, and Paul Grewal, Coinbase’s CLO, have both accused the SEC of overstepping its bounds. Thorn pointed out that the SEC’s actions could be seen as an attempt to classify dollar-backed stablecoins as “crypto asset securities,” even after the regulator recently dropped its case against the issuer of Binance USD (BUSD).
These developments highlight the ongoing tension between the SEC and the cryptocurrency industry, particularly regarding the classification and regulation of digital assets.
