The US Securities and Exchange Commission (SEC) is looking into whether the TerraUSD stablecoin promotion violated federal investor protection requirements before it crashed. The SEC is investigating whether Terraform Labs, the firm behind UST, violated securities and investment product regulations. Stablecoins are digital currencies that are linked to other currencies, commodities, or financial instruments. UST was linked to the dollar and was expected to have a one-to-one peg to the currency through an algorithm and trading in Luna, a related token.
Terraform and its CEO, Do Kwon, have already come under microscope, and the SEC inquiry will only add to the pressure. However, neither Terraform nor Kwon have been charged with any UST-related crime. The SEC is investigating Mirror Protocol on suspicion that Terraform and Kwon marketed unregistered securities using the Protocol, which allows users to exchange crypto tokens mimicking prominent equities such as Apple and Amazon.
The UST failed in May. Following the implosion, Treasury Secretary Janet Yellen stated, "This is a fast-developing product, and there are dangers to financial stability, and we need a suitable framework," later adding that legislation to address regulation is needed.
The rise and fall of Terra Luna. (Source: Trading Economics)
Sources:
https://tradingeconomics.com/lunusd:cur
https://bullstrade.in/sec-investigating-crash-of-terrausd-stablecoin-report-by-investing-com/