According to Valerie Szczepanik, the senior advisor for the Securities and Exchange Commission, some stablecoins violate the securities laws. Valerie announced this at the Austin SXSW conference this on Friday last week.
Valerie categorized the current stablecoins available in the cryptocurrency space into three types; the first type that is linked to a real asset similar to gold, oil and real estate; second types that are linked with fiat reserves; and the third type are those which might cause problems under the securities laws.
She also mentioned that she has personally witnessed stablecoins controlling the price through certain types of mechanisms. The mechanism might be linked with the issuance of the stablecoin, its creation, the redemption of some other kind of digital currency that is linked with it or controlled with the supply and demand.
According to her, such kind of stablecoins in which a central authority controls the price variation time to time might fall into the securities laws.
Valerie Szczepanik also mentioned that the Securities and Exchange Commission will determine the certainty and circumstances of each stablecoins separately.
The regulation of stablecoins is a hot topic from over a year now with the rise of stablecoins last year. The ‘algorithmic stablecoins’ which are not being backed by any asset at all are the most talked about in terms of legality.
In December last year, Basis, a stablecoin that raised more than $135 million was shut down after the Securities and Exchange Commission announced that it could not circumvent from being categorized as security.
She also told the crowd that people often try to hide the facts by labeling their things but the Securities and Exchange Commission looks beyond the showcased labels to understand what precisely they are upto. According to her, the SEC looks at the attributes of the cryptocurrencies such as the economic existence, the transactions etc. whether someone calls it a utility token, a stablecoin or any other coin. She also said that what crypto startups should be asking from the SEC is not forgiveness but authorization or consent.
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