SEC’s Latest Move is “Huge,” Signaling The End of “Existential Securities Risk for Tokens”


In the past two days, the US Securities and Exchange Commission (SEC) has settled with two cryptocurrency projects over the unregistered token sale.

First, the SEC settled enforcement actions against Block.One for $24 million and then Nebulas, the company behind Siacoin, for $120,000.

The day also marked the last day of the SEC’s fiscal year, which Jake Chervinksy, General Counsel at General Finance said means “big news,” and that “ SEC believes EOS & Siacoins aren't securities either. That's huge.”

Huge Win for SAFT Model

While SEC as settled enforcement actions against token issues before such as Gladius, Airfox, and Paragon, the latest actions “break new ground.”

EOS is one of the top ten cryptocurrencies by market cap and Siacoin is the first from before the DAO report. And both actions focused on whether the tokens were securities at the time of sale.

In Block.One’s case, ERC-20 tokens were later converted into EOS while Sia’s case dealt with Sianotes that converted into Siafunds.

Chervinsky notes that the present condition is what is critically important and a token isn’t security just because they're sold in securities transactions. And this is a “huge win” for the SAFT model, he said.

However, as can be seen in Sia’s case, “the new token could be an investment contract too, making the conversion a regulated securities transaction.”

What does it mean?

Despite the SEC not saying it explicitly, it can be inferred that SEC believes EOS and Sia Coins are not securities “as they exist today,” or these settlements won’t have happened, shared Chervinsky.

He further points out the reason for the same, starting with the fact that “SEC rarely pursues multiple actions against the same defendant for violations arising from the same set of facts.”

In other actions where the SEC believes the tokens an issue were securities, “the settlements clearly said so.”

Third, Nebulous has explicitly stated that SEC has thoroughly examined Siacoins and didn't take any enforcement action.

So, what if SEC believes EOS and Siacoins aren’t securities?

“These tokens could represent minimum industry standards for negating the Howey test & avoiding securities regulation — models against which other projects measure their “sufficient decentralization,” Chervinsky said.

If this is indeed true, this would end the “existential securities risk for tokens issued before the DAO Report.”

But Chervinky believes, SEC won’t be this much lenient with future token sales.

Cue Kik. The lawsuit that he said is SEC’s way of saying, work with is or you’ll be sorry.

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