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It could be the wrong time for cryptic investors to hold the tokens issued by initial coin offerings (ICOs).
On CNBC, Jay Clayton, president of the Securities and Exchange Commission (SEC) of the United States, once again stressed that most of the ICOs referred to by investors in the global cryptocurrency market are considered to be securities under US law.
If a token is sold during an ICO to investors in the United States and the token is recognized as a security by the SEC, it may be subject to a sanction imposed by the SEC, which may therefore result in investors being able to request redemptions based on the value of the their initial investment.
Bitcoin is not a security, but most tokens are titles
Dozens of ICOs are already being investigated by the SEC and in the months to come, the SEC plans to repress other projects that have raised money from US investors through the distribution of unrecorded securities.
The SEC president has firmly stated that bitcoin is not a security and several SEC officials have also stated that Ethereum is considered a non-security. But most of the tokens that exist in the market are seen as titles by the commission, which makes them vulnerable to investigations.
Clayton said:
"We do not believe Bitcoin is a security.Many of the ICOs you see and talk about are titles, and if you plan to offer or sell securities, you must do so in accordance with our laws.We have been clear on this, recent actions They further stressed that our securities laws apply to the ICO space and whether people are going to raise money using the initial coin offerings, or have to do it in a private placement or register with the SEC. "
Most tokens, even those with active developer communities, strong products, partnerships and user bases, are down from 80% to 98%. Given the substantial decline in the price of tokens, low market capitalization tokens could attract market participants. But some fell more than 90% against Bitcoin (BTC), which fell 82% from its all-time high to $ 19,500, and the token sales pressure is rising.
Currently, the SEC is employing a strategy to bring down the largest ICOs in their respective sectors, as seen in the recent agreement with Paragon and Airfox. It probably will not go along with large-scale projects like Ripple (XRP) that could lead to a real lawsuit, and Ripple is already dealing with a federal lawsuit that will provide clarity on the regulatory nature of the asset.
SEC's position vis-à-vis ICOs is clear enough; but the guideline on which tokens are considered as securities and which are not remains uncertain. Airfox and Paragon have both declared that they operate as utility token that they are not titles, but the SEC has denied the justification.
As an American lawyer Stephend Palley he wrote:
"The sale of PRG tokens was an unrecorded supply of securities; PRG tokens are securities and the order provides a detailed analysis of sales and corrective actions. almost all token sales in the last 2 years. "
It is not the right time
0x (ZRX) and Brave Attention Token (BAT), two tokens listed by Coinbase, are considered immune to the SEC crackdown on tokens. Coinbase explicitly described in June that only the tokens approved by the SEC as non-security will be listed.
Apart from the two, there are simply no guidelines available to prove that a token is a non-security and as such, due to regulatory uncertainty, it is not the right time to invest or retain tokens.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. It holds investment positions in the currencies, but does not carry out trading activities in the short term or daily.
Featured image courtesy of Shutterstock.
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