Crypto investment firm Paradigm filed an amicus brief in the case between the U.S. Securities and Exchange Commission (SEC), and Terra (LUNA) co-founder Do Kwon.
According to the April 21 filing, the crypto investment firm has never owned or invested in the Terra ecosystem and is not concerned with Defendant’s position. However, it is worried that the lawsuit could have a “seismic impact on the digital assets industry.”
Due to this, it seeks to prevent the SEC from using the case to widen its jurisdiction on the crypto market by designating stablecoins as securities.
Paradigm argues against SEC
Paradigm alleged that the SEC is abusing its powers by attempting to expand its jurisdiction instead of setting parameters on the extent to which securities law applies to digital assets.
“The SEC’ post-hoc-regulation-by-litigation deprives members of the industry who might be adversely affected by the SEC’s litigation campaign the opportunity to air their concerns about the SECs regulatory positions,” said Paradigm.
The VC firm further argued that allowing SEC to treat stablecoins as securities would radically alter the definition of security and called on the court to reject the financial regulator’s argument.
Paradigm warned that accepting the regulator’s argument could have “devastating consequences for stablecoins and the innovation of digital assets.”
The lawsuit highlights efforts from crypto stakeholders to prevent the SEC from sneakily expanding its jurisdiction on the crypto market. In its case against Do Kwon, the regulator claimed that the algorithmic stablecoin UST is security.
The SEC argued that “If an instrument can be exchanged for a so-called “crypto asset security,” the instrument itself becomes a “crypto asset security.”
Meanwhile, Do Kwon’s lawyers have moved to dismiss the case saying that the SEC lacks jurisdiction over UST as it is not a security.
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