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SEC Commissioner Releases Statement on Crypto, Says DeFi Presents Wide Array of Opportunities

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A U.S. Securities and Exchange Commission (SEC) official is offering clarity on decentralized finance (DeFi) while weighing its benefits and risks.

In a statement, SEC Commissioner Caroline A. Crenshaw says that DeFi offers notable opportunities and advantages, but aspects of the sector remain riddled with confusion.

“DeFi presents a panoply of opportunities. However, it also poses important risks and challenges for regulators, investors, and the financial markets. While the potential for profits attracts attention, sometimes overwhelming attention, there is also confusion, often significant, regarding important aspects of this emerging market.”

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Crenshaw says that investing is at the “core of DeFi activity” and one of the benefits participants enjoy is the ability to transfer assets “quickly and easily.”

“Developers have also constructed smart contracts that offer individuals the ability to invest, to lever those investments, to take a variety of derivative positions, and to move assets quickly and easily between various platforms and protocols. And there are projects that show a potential for scalable increased efficiencies in transactions speed, cost, and customization.”

The SEC commissioner says that relying on investors to conduct the proper due diligence before investing in DeFi is inadequate.

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“Accordingly, DeFi participants’ current ‘buyer beware’ approach is not an adequate foundation on which to build reimagined financial markets. Without a common set of conduct expectations and a functional system to enforce those principles, markets tend toward corruption, marked by fraud, self-dealing, cartel-like activity, and information asymmetries. Over time that reduces investor confidence and investor participation.”

Crenshaw says that some DeFi ecosystems ought to be under the SEC’s jurisdiction and developers should therefore seek clarification from the regulator if they are unsure about the status of their project.

“A variety of DeFi participants, activities, and assets fall within the SEC’s jurisdiction as they involve securities and securities-related conduct. But no DeFi participants within the SEC’s jurisdiction have registered with us, though we continue to encourage participants in DeFi to engage with the staff.

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Importantly, if DeFi development teams are not sure whether their project is within the SEC’s jurisdiction, they should reach out to our Strategic Hub for Innovation and Financial Technology… or our other Offices and Divisions, all of which have experts well-versed in issues relating to digital assets.”

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SEC Commissioner Will Not Say If Ether Is a Security

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The SEC remains mum about Ether’s regulatory status amid accusations of picking winners and losers that come from the increasingly frustrated XRP community.

U.S. Securities and Exchange Commissioner Hester Peirce did not answer whether or not Ether, the second-largest cryptocurrency, is a security when asked by her Twitter follower.

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The “Crypto Mom” says that she is willing to build a “sensible and clear” regulatory framework for cryptocurrencies, but she will not focus on particular digital assets.

As reported by U.Today, SEC Chair Gary Gensler has repeatedly dodged the very same question on numerous occasions, making it clear that he will not speak about separate cryptocurrencies to remain neutral.

At the same time, the agency has distanced itself from a 2018 speech made by its former top official William Hinman, in which he famously said that Ether is not a security.

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Amid the SEC’s almost year-long legal battle with Ripple, calls for regulatory clarity continue to persist.

Last month, Ripple CEO Brad Garlinghouse opined that Ether had managed to surpass XRP by market capitalization because of the SEC’s “free pass.”

Peirce, despite being a staunch crypto supporter for years, has refused to speak about the Ripple case since SEC Commissioners are prohibited to speak about ongoing litigation or enforcement actions.

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SEC hawk eyes now on Terra Mirror Protocol and Its CEO Do Kwon for allegedly ignoring several subpoenas

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  • The Terra blockchain co-founder Do Kwon and the Terraform Labs are now on the SEC’s radar for allegedly repeatedly failing to respond to its subpoenas.
  • Kwon says he is surprised by the lawsuit and he has also filed a lawsuit against the regulator for its ‘inappropriate’ serving.

The US Securities and Exchange Commission (SEC) is staying true to its promise of battling alleged unregistered securities as shown by its latest action against the Terra blockchain. The regulator is now going after Terraform Labs – the company behind Terra, and its co-founder and CEO Do Kwon.

As per the litigation release, the SEC delivered to Kwon a series of subpoenas, which he has failed to address. The regulator now seeks to compel the company to comply with the summons that petition for Kwon’s testimony. The investigative subpoenas also call on the production of several documents by Terraform Labs.

Launched in December 2020, Mirror Protocol is a DeFi protocol built on Terra’s blockchain. It is used to mint, issue, and trade synthetic versions of stocks, or Mirrored Assets (mAssets), which track the price of real-world assets. For instance, rather than purchasing Tesla shares, one can buy mTSLA. These assets, according to Kwon, ease global investors’ access to the US equities market.

Terra Blockchain and the SEC

Following investigations, the regulator now has reason to believe that Terraform Labs and Do Kwon “participated in the creation, promotion, and offer to sell mAssets and MIR tokens to U.S. investors.” Such actions are likely in violation of US federal laws which forbid the selling or offering of unregistered securities or being an unlicensed securities broker. Nonetheless, the litigation release reads that:

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The SEC is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity has violated the federal securities laws.

Should the SEC produce any confirmation of these speculations, Terraform and Kwon would find themselves in a similar fate to Ripple Labs and XRP.

In retaliation, the Terra CEO has filed a lawsuit contesting the environment in which the subpoenas were served. Kwon was served the documents while presenting at a September Messari Mainnet cryptocurrency conference in New York. The happening became the subject of the Crypto Twitter buzz with many wondering who exactly got served.

According to Kwon’s legal counsel, such delivery was illegal since it took place in public. This, the legal advisory says, is an infringement of the SEC’s policy that states that serving should happen confidentially.

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Additionally, Kwon’s filing says he has been in communication with the SEC since some time ago. The commission’s actions, therefore, come as quite a surprise to him.

MIR and LUNA price movements

The Mirror Protocol token, MIR, was trading at $3.11 at press time, having lost 2.5 percent in the day per our data. The token hit its all-time high around mid-April when it traded at $12.40. Terra, the stablecoins ecosystem which recently introduced an 88.7 million token burn, saw its native token trading at $51.02, down 0.3 percent in the day.

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SEC Files Action Against Terraform Labs CEO Do Kwon Regarding Mirror Protocol

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The United States Securities and Exchange Commission (SEC) has introduced an action against Terraform Labs, the company behind the design of the Terra blockchain, and its co-founder and CEO Do Kwon. The SEC is seeking an order for Kwon to comply with a series of subpoenas he has failed to address. The investigative subpoenas seek Kwon’s testimony and the production of documents from Terraform Labs

SEC Acts Against Terraform Labs and Do Kwon

The United States Securities and Exchange Commission (SEC) has taken the next step in its battle against Terraform Labs, the company behind Terra, and its co-founder and CEO Do Kwon. According to a litigation release, the SEC has filed an order that seeks to compel the company to comply with a series of subpoenas the SEC delivered to Kwon, which he has failed to address. According to the document, these subpoenas include petitions for Kwon’s testimony and also the production of documents from Terraform Labs.

These actions are part of an investigation that the SEC is currently undertaking regarding Mirror Protocol, a synthetic asset protocol that lets users trade “massets” — tokens with price equivalence to stocks traded on U.S. soil. The SEC stated it has reason to believe that Terraform Labs and Do Kwon “participated in the creation, promotion, and offer to sell massets and MIR tokens to U.S. investors.”

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This would be a violation of U.S. federal laws, by way of selling or offering securities without having registered them, acting as an unlicensed securities broker. However, the document states:

The SEC is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity has violated the federal securities laws.

Do Kwon’s Lawsuit Still Ongoing

The served subpoena and the factors that surrounded its delivery are also being contested in a lawsuit launched by Do Kwon. The documents were served to him while he was presenting at a conference in the country, Messari’s Mainnet. According to Kwon’s legal counsel, the delivery of this subpoena was illegal, because Kwon was served the subpoena in public.

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This goes against SEC policy stating these procedures must be done in a confidential way, and many assistants witnessed the delivery. Kwon’s filing stated he had been in conversation with the SEC regarding Mirror Protocol since some time ago, and that he was surprised by the actions.

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