2018’s battle between The SEC and cryptocurrency
Though 2018 was for the most part an exciting time for the crypto community, there has been one notable cloud over proceedings in the form of the SEC’s involvement…
As cryptocurrencies continue to rise, the US Securities and Exchange Commission (SEC) has been trying to implement regulations on the industry any way it can.
In late November the SEC issued some firm guidelines in regards to crypto with the ‘Statement on digital asset securities issuance and trading’ which outlines the need for firms to register their tokens as securities instead of leaving them to be defined as decentralised entities. Firms issuing ICOs also need to register with the SEC. This followed various cases that sent waves through the community.
A statement read: “These two matters demonstrate that there is a path to compliance with the federal securities laws going forward, even where issuers have conducted an illegal unregistered offering of digital asset securities.”
In March it was confirmed that ‘dozens’ of startups were and are being investigated by the SEC for violations of its federal securities regulations. As of this date, up to 80 subpoenas had been issued and this is guaranteed to have soared in the time since.
Co-director of the enforcement division Stephanie Avakian said: “We are very active, and I would just expect to see more and more… We’re doing obviously a lot in the crypto space, and we’re seeing a lot in the crypto space.”
But, as CNR detailed recently, the SEC’s stance on cryptocurrency may have been out of step with reality, with the authority reportedly entering spaces that it shouldn’t have. This is according to a paper by Penn State Law visiting Assistant Professor Michael O’Connor, which argues that cryptos are not securities when traded on exchanges.
He told CNR: “I’ve not yet seen a technical challenge to my fundamental thesis, that in order for it to be an investment contract under contract law, this includes a promise of future value increase.”
“I would be surprised if you would need a genuinely new organisation,” he continued. “I don’t know. Regulatory bodies cover a lot of ground. They already deal with a tremendously complex web of unlicensed securities.”
Amidst these matters is the repeatedly-delayed decision on Bitcoin ETF, which has been ongoing for much of 2018. As the year comes to a close, the SEC is still adamant that it needs more time in which to make a decision.
In February the SEC did decide to allow the purchase of stocks with crypto for the first time, via Seattle-based venture capital company Pithia Inc.
And there was recently some fight back from the crypto world, with a preliminary injunction against Blockvest over its status as a securities offering challenged. The court eventually ruled that the SEC had not actually proven that the Blockvest ICO was a security, and so could not be granted the injunction.
While this is just one case of its type, it does open the door for similar rulings as things continue in the new year…
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