Witch Hunt and new Inquisition from SEC: trials, fines & bans. Which cryptocurrencies are safe and which are in danger
From this review, you will learn the U.S. Securities and Exchange Commission (SEC) attitude to the blockchain and cryptocurrency market in general, which currencies can feel confident in the US market, which ICO the Commission does not allow, and why it does so.
SEC General Crypto Policy
- ICO may be unregistered securities.
- Such securities must be registered, otherwise, they will be outlawed.
- Tokens can be called whatever you like, but if they have signs of securities, then SEC should deal with them.
- The release of tokens can carry risks and can contain signs of frauds and manipulations.
The tokens aren’t considered as securities if it fits the next criteria:
- The decentralized part of the token works and allows transactions.
- The token is used not only for market speculation.
- A token can be considered as an asset to preserve value (the role of a financial instrument).
In December 2017, the Commission represented by Chairman Jay Clayton made one of the most significant statements regarding its position on cryptocurrencies and ICOs. Recognizing the significant contribution of the new blockchain technology to investment opportunities, the Commission calls for careful study of the subject of the transaction and an approximate list of issues that will help to ensure the safety and legality of this investment.
At the end of 2018 two cryptocurrency startups — CarrierEQ Inc. and Paragon Coin Inc. — agreed (under pressure from the regulator) to register tokens issued during the ICO as securities. They also had to pay fines of $250 thousand.
Back in 2019, John Reed Stark, Former Chief of SEC Office of Internet Enforcement, stated with absolute certainty that he was confident that the U.S. regulators would eventually drive cryptocurrencies out of the U.S. financial market. He : “Much of Bitcoin’s value, outside of mere speculation, is derived solely from its ability to facilitate criminal activity.”
SEC Investigation vs. DAO
The most high-profile case, which ended with the SEC triumphant victory, is without a doubt the SEC vs. TON trial. We described this process against the ICO attempt of the blockchain system by Pavel Durov in one of our detailed . TON surrendered in May 2020. This was on the official channel by Pavel Durov. It is noteworthy that the SEC is absolutely sure that Durov knew that TON ICO was illegal.
SEC attitude to Bitcoin
The SEC has issued permission to launch the NYDIG (New York Digital Investment Group) Bitcoin Strategy Fund based on Bitcoin futures managed by Stone Ridge. The argument to this decision: the fund plans to invest in Bitcoin futures only with fiat funds, which reduces the risk of manipulation. However, for more than a year, the Commission has not allowed to launch a single Bitcoin-ETF fund.
SEC attitude to Libra
Under pressure from SEC, the key partners (PayPal, Visa and Mastercard, eBay, Stripe, and Mercado Pago) left this Facebook project. Visa is going to return to the Libra Association if it satisfies all the requirements of all the regulators.
SEC attitude to Ethereum
Ethereum had no essential problems with SEC over the past two years. At this stage, the SEC does not consider this cryptocurrency a security. However, depending on its properties and behavior, the attitude may be revised. So, Grant Gulovsen, the founder of the law firm Gulovsen Law Office, in his article that Ethereum 2.0 SEC may well be considered a security.
SEC vs. Enigma
raised $45 million during an ICO in 2017. As with TON, the SEC saw unregistered securities in them.
After several court hearings, the Enigma organizers surrendered and pleaded guilty. Enigma representatives agreed with the decision to pay a $500,000 fine and assured they were ready to return investor funds.
The company will register its tokens as securities and will be able to sell it on the exchanges in the future.
The fight of SEC with cryptocurrency exchanges and other entities
Not only cryptocurrencies, but also crypto exchanges fall under special attention of the SEC: for trading those tokens that the Commission recognized as unregistered securities.
The SEC is officially positive about blockchain technology, but it is extremely wary of the ICO of most cryptocurrencies and closely monitors the activities of cryptocurrency exchanges falling under US jurisdiction. Separately, Bitcoin and Ethereum have no special problems, but the rest of the cryptocurrencies usually fail to enter the US market and carry out ICOs without the Commission’s oppositions. This suggests that while US regulators do not want to give freedom to the cryptocurrency market.
Originally published at https://coinjoy.io.