A variable geometry boundary – In the United States, the relationship between Securities and Exchange Commission (SEC) and cryptocurrencies are more than tumultuous. The financial policeman specifically conducts a (endless) hunt. against Ripple and its XRPwhich he accuses of being a title, or titles. But she is difference between these security token and the utility tokens ? She is both blurry And very skinny.
Titles : SEC fights disorderly battles against crypto projects
Before looking into the (almost wet finger) methods of DRY to find out whether or not a cryptocurrency is a titles in his eyes, let’s do a little summary quick in its actions.
Mainly from the crazy period of ICO (initial coin offering) of the years 2017-2018, the Securities and Exchange Commission had to face a new guy of resources that did not fit into any of these prefabricated boxes: crypto-assets therefore.
Faced with the unknown, the SEC took a look at it for the first time more obvious goalsAnd this, from the year 2018. The financial policeman has come up to to block unique even before until it takes place at the end of 2019: the public fundraising of Telegram’s TON project it could never be done.
More recently, this July 2022, it is the still very established crypto stock exchange Coinbase which has had problems with the SEC. The latter accuses the platform of sell security token without having permission.
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Security Token And utility tokens : the SEC itself does not know how to define them well
Because Coinbase rather than any other exchange offering, for example, XRP or any other cryptocurrency perceived as titles ? Sometimes we wonder if it isn’t right at the head of the customerif the latter does not return to the SEC.
So how does this body define what a title is? According to a law dating back to … drum roll … 1933. Soon not far froma century therefore. With this very element, we begin to understand themismatch with cryptocurrencies, the oldest of which, Bitcoin (BTC), was born in January 2009.
To find out if a cryptocurrency falls under this law – called the Securities Law -, the SEC uses the Try Howey. The latter was defined in 1946with 4 criteria definition of a title:
- It must be a investment silver;
- What Investors Expect generate profit ;
- That this investment of money is made in a joint venture ;
- And if the profits come from the efforts of a promoter oa Third.
Suffice it to say this definition very wide can potentially relate to … well, all crypto projects that have a team (or worse still a company) of development. And if in addition to the tokens have been sold at the beginning of the project (or even at any time): the SEC sword of Damocles can fall on them.
Ethereum and its classified ethers ” utility tokens according to the SEC
What irritates Ripple in its lawsuit with the SEC, which regularly qualifies “unfair”is the fact of being accused whileEthereum (ETH) gets away with it ethers considered utility tokens – Bitcoin being frankly regarded as goods (goods), how’gold.
In fact, in 2018, William HinmanSEC Director of Institutional Finance explained that – despite the sale of ETH at the launch of this project – this network had now become “highly decentralized”.
The utility tokens (literally, utility tokens) are considered as such if they have one a concrete non-speculative utility (base): to carry out operations on a network, or to obtain services on an exchange platform, for example. Of course, these tokens still can earn a lot of value with an increase in their demand / utility, as in the case of ethers.
With a law and criteria dating back to the beginning of the last centuryand cryptocurrencies whose nature changes with the speed of light, the SEC is therefore in a difficult position to know which cryptocurrency to attack. Because, if starting in 2015, Ethereum could very well have it be regarded as titles, this is clearly no longer the case today, according to the same SEC representative. Why the XRP is entitled to this (bad) treatment in titles so ? The fact that this project is still a company (Ripple Labs) at the service of the development of its ecosystem it seems enough. We warned you: security token Where is it utility tokensit is at the extreme limit of being decided on a wet finger by the SEC.
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