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The Securities and Exchange Commission (SEC) of the United States has granted to another cryptocurrency companies permission to sell his native cryptocurrency.
On Thursday, the SEC issued a “letter of no action” (dated November 17) to IMVU, a digital avatar company, allowing the company to sell its VCOIN digital tokens to users, albeit with strict restrictions on how these tokens can be sold.
The securities regulator has only granted a handful of other similar letters, including Turnkey Jets and Pocketful of Quarters, making the latest action somewhat noteworthy despite the token’s relative obscurity. At first, the SEC allows IMVU to sell tokens designed to be converted into fiat by users. (In its previous rulings, the SEC said users could not buy, sell, or trade Quarters or Turnkey tokens.)
“Based on the facts presented, the Division will not recommend law enforcement action to the Commission if, relying on your opinion as a consultant that VCOIN is not a stock, IMVU offers and sells VCOIN, which is transferable both on and off the IMVU platform, without registration under Section 5 of the Securities Act and does not register VCOIN as a class of equity securities under Section 12 (g) of the Exchange Act, ”wrote Jonathan Ingram, legal counsel to the Division of Financial Corporations of the SEC.
VCOIN is specifically built on Ethereum and can be used as a royalty system for creators, allowing users to be compensated for the provision of services.
According to the letter from the SEC, IMVU can only sell tokens at a fixed price; buyers must agree to purchase tokens to use and not speculate on the price; and the proceeds cannot be used to build the VCOIN network. Users must also comply with a number of restrictions on customer recognition and anti-money laundering, the SEC said.
In requesting an action ban letter, IMVU attorney Michael Didiuk, partner of Perkins Coie law firm, wrote that users cannot convert VCOINs to fiat currencies on their platform, even if they would have to pay a 10% fee. -15% if they convert to a different platform.
IMVU intends to deter potential speculative actions by preventing users from “getting more VCOINs than they could realistically use” or buying enough tokens to “make significant profits,” the request said.
Users will also not be able to transfer too many tokens from the IMVU platform and will have to respect a waiting period of up to 45 days before they can make off-platform transfers, according to the letter.
“Taken together, these platform controls should eliminate any reasonable incentive to pursue arbitrage profits from a spread between IMVU’s fixed VCOIN price and an off-platform VCOIN price,” Didiuk wrote.
IMVU filed the “VCOIN” brand in August 2019, according to Justia. The filing says the branding will apply to “downloadable virtual goods,” including digital tokens that use blockchains “to execute and record transactions,” meaning a cryptocurrency.
