Judge rules that Terraform Labs offered and sold LUNA as unregistered security, Barry Silbert leaves Grayscale’s board, and China takes action against Tether.
In this week’s edition of Hodler’s Digest, a judge has ruled that Terraform Labs, the company behind the Terra blockchain network, offered and sold its native cryptocurrency LUNA as an unregistered security. This decision highlights the ongoing regulatory scrutiny faced by the cryptocurrency industry.
According to the ruling, Terraform Labs raised $23,062,500 by selling LUNA tokens to investors, who were promised future returns based on the success of the company’s ecosystem. The judge concluded that these promises constituted an investment contract under the definition of the Howey test, which determines whether an asset qualifies as a security.
The Howey test is a legal framework developed by the U.S. Supreme Court to determine whether a transaction involves an investment contract and therefore falls under securities regulations. This ruling could have significant implications for other cryptocurrencies that are sold to investors with similar promises of future returns.
Meanwhile, Barry Silbert, the founder and CEO of the Digital Currency Group, has resigned from the board of Grayscale Investments. Grayscale is one of the largest cryptocurrency asset management firms and is known for its Bitcoin Trust, which allows institutional investors to gain exposure to Bitcoin without directly holding the cryptocurrency.
Silbert’s departure from Grayscale’s board comes as the Digital Currency Group is facing allegations of insider trading. According to reports, Silbert purchased substantial amounts of cryptocurrency through private placements before they were made available to the public, potentially giving him an unfair advantage.
The resignation of Silbert from Grayscale’s board may be an attempt to mitigate the damage caused by these allegations and distance the company from any potential legal issues. It remains to be seen what impact this will have on the reputation and operations of both Grayscale and the Digital Currency Group.
In other news, China has taken action against Tether, the controversial stablecoin issuer. The People’s Bank of China (PBOC) has banned financial institutions and payment companies from providing services related to cryptocurrency trading and Tether specifically. This move is part of China’s ongoing crackdown on cryptocurrencies and demonstrates the government’s increasing scrutiny of stablecoins.
The PBOC’s ban on Tether further adds to the regulatory challenges faced by stablecoin issuers, as they are now being targeted by authorities in multiple jurisdictions. This regulatory uncertainty poses a significant risk to the stablecoin market, as it could deter investors and limit the growth of these digital assets.
Overall, these developments highlight the increasing regulatory pressures faced by the cryptocurrency industry. As governments and regulators around the world scrutinize cryptocurrencies and their associated activities, such as initial coin offerings, asset management, and stablecoins, it is becoming clear that the industry needs to adapt and comply with existing securities regulations to ensure its long-term viability.