Crypto investment firm Paradigm has filed a legal brief in the ongoing case between the U.S Securities and Exchange Commission (SEC) and Do Kwon, Terra (LUNA) co-founder, warning that the lawsuit could adversely affect the digital assets industry. The firm states that it is not worried about the defendant’s position and has never invested or owned Terra. Rather, Paradigm concerns lie with the radical alteration of the security definition by the SEC and the devastating effects that it may have on stablecoins and other digital assets.
Paradigm Argues Against SEC’s Jurisdictional Expansion
In the amicus brief filed on April 21, Paradigm alleged that the SEC is attempting to expand its jurisdiction instead of outlining the extent to which securities law would apply to digital assets. The venture capital firm maintained that allowing SEC to treat stablecoins as securities would be an error, calling on the court to reject the regulator’s assertion. Paradigm also highlighted the commission’s regulatory responsibilities by emphasizing that the use of the lawsuit to expand their jurisdiction abuses their power.
SEC Views UST As A Security
The case against Do Kwon illuminates stakeholders’ efforts to prevent SEC from inappropriately expanding on its regulatory reach on the crypto market. The regulator had claimed the algorithmic stablecoin, UST was a security, contending that any instrument that can be swapped for a crypto asset ‘security’ also becomes termed an asset in the same category. Do Kwon’s lawyers subsequently moved for the case’s dismissal, asserting that UST was not a security and, hence, out of context.
It is worth noting that although Paradigm has never invested in Terra, co-head Matt Huang participated in the decentralized finance platform’s investment round, raising $25 million, before he and Fred Ehrsam founded Paradigm.
[h/t Oluwapelumi Adejumo]