Security or Currency? The regulatory dilemma of LianGuaiyLianGuail stablecoin PYUSD

Balancing Security and Currency The Regulatory Conundrum of the PYUSD Stablecoin by LianGuaiyLianGuail

Source: AiYing Compliance

The Securities and Exchange Commission (SEC) has recently issued a subpoena to LianGuaiyLianGuail, requesting access to documents related to their newly released stablecoin PYUSD. This move has raised concerns as it opens up the possibility that if LianGuaiyLianGuail’s stablecoin is deemed a security, then anything could be classified as a security.

Why is the SEC suddenly concerned about LianGuaiyLianGuail’s stablecoin? It turns out that the SEC has been taking a series of regulatory actions against the cryptocurrency industry in recent times. In March of this year, the SEC even filed a lawsuit against LianGuaixos (LianGuaiyLianGuail’s stablecoin partner) over the issuance of their Binance-backed stablecoin BUSD. Now, the SEC has turned its attention to LianGuaiyLianGuail’s stablecoin PYUSD.

This new subpoena gives the impression that the SEC is “picking winners” in the emerging crypto world. LianGuaiyLianGuail is the first major fintech company to issue a stablecoin, followed closely by VISA. Many believe that the entry of these big companies is beneficial to the United States as stablecoins are primarily pegged to the US dollar, which undoubtedly increases global demand for the dollar and strengthens America’s currency hegemony.

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However, the release of PYUSD has also sparked controversy. Maxine Waters, the former chair of the U.S. House Financial Services Committee, expressed concerns about this stablecoin. She believes that the issuance of new forms of currency needs federal regulation.

But not everyone agrees. Former BUSD manager Austin Campbell believes that the SEC may use an exception called the “Howey test” to argue that PYUSD is an “investment contract” under existing securities laws. Simply put, if a project has the potential for “collective enterprise” to make profits, then the SEC may consider it a security.

Campbell explains that LianGuaiyLianGuail and LianGuaixos created this stablecoin together, they will issue this stablecoin and make profits from it, therefore it is safe. However, under current securities regulations, the so-called “profits” must come from a “collective enterprise” with the “expectation of profits” primarily derived from “the efforts of others.” This seems rather comical as LianGuaiyLianGuail and LianGuaixos are working together.

If stablecoins are treated like securities, then this opens up a Pandora’s box. Because according to this logic, anything that has the potential to generate profits can be considered a security, including checking accounts, gift cards, reward points, etc. Campbell refers to this situation as “the fallacy of reductio ad absurdum,” meaning the SEC can arbitrarily declare something as a security simply by saying it is.

That’s the story between the SEC and LianGuaiyLianGuail’s stablecoin. Although we cannot predict the outcome at this point, it undeniably poses new challenges to the cryptocurrency industry.

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