FTX may extend its repayment deadline as the United States Securities and Exchange Commission (SEC) has warned the defunct crypto exchange that it will challenge FTX’s plans to repay creditors with stablecoins or other digital assets.

In an Aug. 30 court filing to the United States Bankruptcy Court in Delaware, SEC regulators stated that while it might not be illegal for FTX to repay its creditors with stablecoins,  the body will retain its right to dispute repayments involving US-dollar pegged digital assets.

The filing said, “The SEC is not opining as to the legality, under the federal securities laws, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets.”

The US SEC cited potential non-compliance with federal securities regulations as one of the reasons behind its decision. Furthermore, the agency pointed out that FTX has not yet identified “the distribution agent”, the specific exchange entity responsible for disbursing stablecoins to creditors, should it accept the proposal from the defunct crypto exchange.

FTX Repayment Timeline Faces Potential Delay

Following the approval from a New York judge, FTX has explored various options to compensate creditors, including a previously abandoned proposal to revive the platform.

However, the SEC’s objection to FTX’s repayment plan, which included cash and US Dollar-pegged stablecoin distributions, may result in a prolonged delay for creditors seeking to recover their losses.

The SEC’s stance has been criticized by some prominent voices in the crypto space. For instance, James Murphy, a legal expert and strategic advisor, has drawn parallels between the SEC’s current approach and its previous actions in the Voyager Digital bankruptcy case of 2022.

Murphy suggested that the SEC’s lack of clarity on crypto transactions may similarly hinder the FTX repayment plans.

Alex Thorn, Galaxy Digital’s head of research, and Paul Grewal, Coinbase’s chief legal officer, also shared a similar sentiment with Murphy.

the SEC is again reserving the right to claim dollar-backed stablecoins are “crypto asset securities,” despite dropping their enforcement against paxos and losing their MTD on BUSD against binance in july

this is the height of jurisdictional overreach

it’s quite absurd if you… pic.twitter.com/laT6vY5i6T

— Alex Thorn (@intangiblecoins) September 1, 2024

Grewal added, “Why provide clarity to the market when threats and aspersions will do? Investors, consumers, and markets deserve better. Way better.”