SEC Warns of Potential Challenges to FTX’s Stablecoin Payments

FTX’s Repayment Strategy Under Scrutiny

Following FTX's collapse in November 2022, the crypto exchange has explored several methods to repay creditors. The latest liquidation plan proposes to settle creditor claims based on the U.S. dollar value of assets at the time of bankruptcy, either in cash or stablecoins. However, the SEC's stance introduces uncertainty into this plan. The regulator emphasized that it retains the right to challenge any transactions involving crypto assets, especially stablecoins.

Criticism of SEC’s Overreach

The SEC's warning has sparked criticism from key figures in the crypto industry, who accuse the regulator of overreaching its authority. Alex Thorn, Galaxy Digital’s head of research, and Paul Grewal, Coinbase’s chief legal officer, have both expressed their disapproval. Thorn highlighted that the SEC continues to assert that dollar-backed stablecoins could be classified as "crypto asset securities," despite dropping its case against Paxos, the issuer of Binance USD (BUSD), in July.

"The SEC doesn’t even make a case here. They are just unwilling to let it go," Thorn remarked, criticizing the regulator for what he views as an unnecessary and burdensome stance on stablecoins. Grewal echoed these sentiments, arguing that the market deserves clear regulatory guidelines rather than vague threats and warnings.

As the SEC maintains its position, the crypto community watches closely to see how this will impact FTX's efforts to compensate its creditors, and what it might mean for the broader regulation of stablecoins in the U.S.