The US Securities and Exchange Commission recently expressed concern about the anticipated distribution of funds to FTX creditors. The bankrupt cryptocurrency exchange, which collapsed in November 2022, had planned to repay its creditors using stablecoins. However, the SEC raised concerns about the potential legal implications of this approach.
In a court document issued on Friday, the SEC stated that it reserves the right to contest the legality of cryptocurrency transactions under federal securities laws.
The regulator noted that the FTX estate administrators have yet to identify the distribution agency in charge of disbursing the stablecoins to creditors. The uncertainty complicates the ongoing bankruptcy proceedings.
The plan proposed by FTX aims to compensate creditors with an amount ranging between $14.5 billion and $16.3 billion by May 2024. The approved restructuring plan allows debtors to obtain up to 118% of their claims in cash.
However, this is only applicable to creditors with claims under $50,000. The possible use of stablecoins as part of the payment process has generated concerns, particularly in light of recent SEC statements.
The SEC’s stance on stablecoins has caused controversy in the cryptocurrency market. In August, the SEC proposed that stablecoins pegged to the US dollar be categorized as currency alongside other financial assets such as bank deposits. However, the most recent filing indicates that the SEC remains hesitant about considering stablecoins as equivalent to cash.
Read CRYPTONEWSLAND onThe SEC’s ongoing investigation into FTX’s repayment arrangement illustrates the greater regulatory uncertainty surrounding stablecoins. The agency’s actions may establish a precedent for how other bankrupt cryptocurrency companies handle their debts to creditors.
As FTX proceeds with its repayment plan, the SEC’s concerns highlight the need for clarity in the regulatory framework governing stablecoins.
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