Compound founder warns of ‘Armageddon’ for the crypto industry amid U.S. regulators’ actions

The latest actions by U.S. regulators against crypto firms are ‘a planned liquidation of products’ and could wipe out the growing market. This view was voiced by Compound Labs founder Robert Leshner on a podcast with Frank Chaparro.

Stablecoins as securities could spell ‘Armageddon’ for crypto 🧨

In this episode, @fintechfrank & @rleshner cover:

🚨 the multiagency crypto crackdown
⚙️ how ‘specialization’ improves DeFi governance
⚖️ why Treasury yields > DeFi

Full episode below 👇https://t.co/wM9pigNiEL

— The Scoop (@TheScoopPod) February 16, 2023

Leshner argues that these measures were not the result of a mistake.

“In many respects they open a new front against the crypto industry. The argument in both cases was that Kraken and Paxos do not comply with investor-protection rules. And there are undisclosed risks. Interestingly, these are fairly weighty arguments,” he noted.

According to Leshner, users and experts “do not really know how Kraken works.” This same issue affected FTX or Celsius, causing “everything fell like dominoes.” In this context he called crypto firms “black boxes”.

In February SEC filed claims Paxos for involvement in the issuance and listing of the Binance USD stablecoin (BUSD). The agency deemed the asset an unregistered security. Prior to this, the investigation into the issuer of the ‘stablecoin’ initiated NYDFS.

Kraken settled the SEC’s allegations regarding its staking program. The company agreed to shut down the service and pay $30 million in penalties.

“The argument that USD Coin or Tether are securities can be challenged for months and years. But if something goes wrong in any relationship, I think it’s an Armageddon scenario for many cryptocurrencies,” he emphasised.

He noted that stablecoins account for a large share of on‑chain activity, and harsh measures against them threaten the DeFi sector.

In December, investors in Compound filed suit against the platform for selling unregistered securities in the form of the COMP token.

Binance’s Chief Strategy Officer Patrick Hillman intends to settle the claims with U.S. authorities by paying fines. He described the regulators’ latest actions as a threat to the United States’ digital asset industry.

Jake Chervinsky from the Blockchain Association. But the expert is confident that the community in the country will be able to fight back.