US District Judge Affirms SEC ICO Regulation Probe Authority

A Shot in the Arm

A judge in a US federal court has ruled that the country’s securities laws cover ICOs. The ruling is a boost for SEC ICO regulation probe authority, since the ruling came in the course of a likely fraudulent Initial Coin Offering (ICO).

ICOs have become widely popular since 2017. Many blockchain-crypto start-ups have raised millions of dollars using this route. The popularity continued unabated in 2018, as a Business Insider article stated. The article quotes a joint report from PwC Strategy and the Crypto Valley Association, which shows that blockchain-crypto entrepreneurs raised US$13.7 billion from ICOs in the first five months of 2018.

ICOs have democratized investment; however, they have operated outside regulations. To do this, they claimed that their tokens only offer access to utilities. The SEC isn’t accepting this argument since they use the Howey test to determine if an investment instrument is a security. They found that start-ups are issuing tokens with promises of future profit. This categorizes those tokens as securities.

SEC ICO regulation
  • Facebook
  • Twitter
  • Buffer
  • reddit
  • LinkedIn
Image Credit: US Government / Wikimedia Commons

Securities regulations in the US have stringent registration, reporting, and disclosure requirements. Only accredited investors can buy securities because of the need to protect small investors from securities market risks. The SEC found that most crypto start-ups didn’t comply with securities regulations, which are in place to protect investors from scams.

The SEC is investigating many ICOs and existing companies for possible securities violations. Since blockchain-crypto is a new area, regulations are still evolving. Hence, there is uncertainty about whether the SEC can use securities regulations to probe ICOs. The US federal judge ruling affirms the authority of the SEC to investigate ICO regulations.

Needed: Investor Protection

The recent ruling came in course of a criminal case in New York involving a businessman named Maksim Zaslavskiy. He has allegedly defrauded investors in two ICOs, additionally arguing that securities laws aren’t applicable in his case. One ICO was the ReCoin Group Foundation and the other was the Diamond Reserve Club. His investors didn’t receive any tokens, and there was no indication of any actual real estate or diamonds.

Raymond Dearie, the case’s US district judge, has only given his ruling on the question of whether securities law applied in this case. Prosecutors argued that Zaslavskiy offered securities investment contracts; however, Zaslavskiy challenged that. He claimed that these ICOs were currencies, not securities. He also stated that the securities laws were vague, hence they can’t be applied to ICOs.

Dearie rejected these arguments. He made it clear that labeling an investment contract as cryptocurrency doesn’t exempt it from securities regulations. He has deferred to the jury about the fraud, and whether these two ICOs actually were securities. His refusal to exempt crypto from securities regulations is significant. It means that the SEC ICO regulation probes have a sound legal basis.

BlockTelegraph has obtained a press release with statements from James Blakemore, co-founder of Ketsal Consulting; Kendrick Nguyen, CEO of Republic; and Ciarán Hynes, Managing Partner at COSIMO Ventures, who are experts on crypto regulations. They all emphasize the need for transparency. They say that an ICO selling securities should certainly declare that; however, ICOs following regulations have nothing to worry about. They also welcome further clarity while calling on investors to watch out for scam ICOs.

  • Facebook
  • Twitter
  • Buffer
  • reddit
  • LinkedIn

Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *

TigerWit Partners with Liverpool FC to Promote New Blockchain-Based Trading App

A row of Liverpool FC soccer kits.

Official ForEx Trading Partner

Liverpool FC has entered into a new global partnership with TigerWit. The English premier league has embraced the partnership, promoting TigerWit’s blockchain-enabled trading through a smart, sleek, highly-intuitive app. The app is harnessed across a distributed trading ledger.

Highly detailed, cryptographically encoded transactions are shared through the trading network. The distributed trading ledger at TigerWit is based on blockchain trade settlement, ensuring delivery of greater security, more efficiency, transparency, and trust.

The soccer giant joins other Premier league clubs to embrace Blockchain in cryptoasset trading. Just recently, Brighton & Hove Albion, Newcastle United, Tottenham Hotspur, Crystal Palace, Leicester City, Southampton, and Cardiff City announced new partnerships with eToro.

New trading partners TigerWit and Liverpool FC pose with a soccer kit that says TigerWit.
  • Facebook
  • Twitter
  • Buffer
  • reddit
  • LinkedIn
Image Credit: Liverpool FC

Billy Hogan, Managing Director and Chief Commercial Officer of Liverpool FC, was excited about the partnership, stating, “As our official Online Foreign Exchange Trading Partner, we are very excited to develop our partnership with TigerWit. Liverpool FC has a large number of fans across the globe, particularly in TigerWit’s core markets in the UK, Europe, and Asia. Through this new partnership with TigerWit, we look forward to marketing activations, which help bring our fans around the world even closer to the Club.”

Tim Hughes, Chief Executive Officer at TigerWit, also expressed his enthusiasm with the partnership, stating, “Today is a proud day for TigerWit, we are launching our innovative blockchain-based trading app and partnering with Liverpool FC. TigerWit believes in a market that does not discriminate or play favorites. We have developed a pioneering blockchain-based settlement system that instills trust by delivering greater security and process efficiency. Trading should be, and can be, more transparent and fair for all traders, regardless of experience or the size of their account.”

What the New Deal Presents

The partnership will aid in driving technological development in Europe, the UK, and Asia. These are Liverpool strongholds with many of the League’s Kopites. Additionally, it will assist to increase downloads of the trading app in these regions.

TigerWit will also benefit from brand exposure at Anfield as well as through Liverpool’s social media channels. This is in addition to matchday privileges and club hospitality at the stadiums.

Liverpool players Alisson Becker, Georginio Wijnaldum, and Naby Keita have already been featured in a TV commercial with the brand.

Traders and users will benefit in trading with TigerWit’s app in various ways. These include; a minimum initial deposit of US$50; flexible leverage; multiple product options such as FX, precious metals, commodities, and indices; and low minimum order value of just 0.1 Lot.

This may seem to be an unusual partnership, but both groups are highly enthusiastic about the benefits and exposure they’ll give to each others’ fans.

  • Facebook
  • Twitter
  • Buffer
  • reddit
  • LinkedIn

Stablecoins – The Holy Grail of Cryptocurrencies

stablecoins

The Key to Adoption

There are a number of reasons why cryptocurrencies have not been adopted as a universal method of payment yet, including poor reputation, technical complexity, and regulatory uncertainty. However, one reason stands out above all: volatility.

First of all, it is simply not practical to price goods in a currency that might be worth half a few hours later. Even in a system that updates prices automatically, the client would simply be confused as to how much he is meant to pay. Secondly, merchants, understandably, do not like the risk associated with being paid in something that might be worth half the next day.

This problem has led to the search for more stable alternatives. Stablecoins aim to peg their value to fiat currencies or other real-world assets that promise price stability. Even the BBC has recently acknowledged the importance of this search for stability.

Making Price Guarantees in a Free Market

Providing a stable cryptocurrency is surprisingly difficult. The key problem simply is that cryptocurrency markets are free markets. In such a market, assets are worth whatever people are willing to pay for them.

Imagine pegging a cryptocurrency to the US Dollar. You cannot force someone to trade an asset at exactly 1 USD if the buyer is willing to pay more. The only possibility is to convince everyone in the system that the token really is worth 1 USD and not a single cent more or less. It’s in the nature of people to speculate and try to make money, so if there are agents in the system that believe the value may fluctuate, it will eventually fluctuate. Investors will turn this belief into a self-fulfilling prophecy.

To “guarantee” the value of an asset it needs to be backed with some sort of collateral, the same way gold bonds are backed by real gold. Currently, there are two ways of doing this: off-chain and on-chain.

An example of an off-chain backed stablecoin is Tether. Tether is pegged to the US Dollar through a centralized company. The simple idea is keeping 1 USD for each 1 USDT (Tether’s stablecoin) issued in an audited bank account.  A reputable auditing firm certifies that the collateral really exists. There is an obvious problem with this approach. Both the Tether company and the auditing firm are trusted third parties, the very entities blockchain technology is meant to eliminate. If we trust such third parties, we might as well trust banks and use traditional fiat money. In fact, banks are probably the safer option as they are tightly regulated. Tether has been accused of not providing sufficient transparency and the project has caused some controversy in the past.

An alternative approach has been implemented by MakerDAO’s DAI stablecoin. This entirely on-chain approach issues DAI through a smart contract by locking Ether acting as collateral. The system is meant to assure that there is always sufficient Ether present to cover large and sudden price changes. So far, this system has managed to survive the large increases and subsequent value loses in the Ether cryptocurrency we have witnessed over the last year. MakerDAO has just announced a move towards multi-collateral DAI, a stable cryptocurrency backed by a number of digital assets, not just Ether.

Stablecoins are clearly an important tool going against the speculative nature of the volatile cryptocurrency eco-system. It is safe to say that both centralized and decentralized solutions both have to prove themselves by standing the test of time.

 

  • Facebook
  • Twitter
  • Buffer
  • reddit
  • LinkedIn

Join Our Mailing List

Keep up with the latest in FinTech, Blockchain, and Crypto.

You have Successfully Subscribed!