OpinionCryptocurrencies that SEC will Target

Cryptocurrencies that SEC will Target

Let’s see which cryptos the sec is targeting and which ones are next. Okay, a quick bit of background the securities and exchange commission sec regulates the issuance and trading of assets classified as securities in the united states. So which cryptocurrencies that SEC will target?

Securities include assets like stocks bonds and even some cryptocurrencies. The sec determines which assets are securities using the Howie test which consists of four criteria.

You use the money to buy it. The price action is the same for everyone who buys it. You’re expecting to make a profit and this expectation of profit is coming from an identifiable third party pretty straightforward.

Cryptocurrencies that SEC will target: Now obviously almost every single cryptocurrency meets the first three criteria of the Howey test. It’s the fourth criterion where things get complicated because you can’t always identify a third party that’s creating the expectation of profit you hope to get when you invest in a particular coin or token.

In a 2018 speech, former sec director bill Hinman famously stated that the Ethereum eth coin is not a security because Ethereum is quoted as sufficiently decentralized. In other words, multiple third parties are creating the expectation of profit from investing in eth.

Now the problem is that the sec never explained what counts as sufficiently decentralized. There’s much more to a cryptocurrency’s decentralization than the number of validators or developers. 

This lack of regulatory clarity has made it extremely difficult for crypto projects and crypto companies to comply with the sec. It has also given the sec the ability to crack down on crypto projects and companies that clearly aren’t issuing or trading cryptocurrencies that classify as securities.

Which cryptocurrencies that SEC will target? The best example here is stable coins which sec chairman Gary Gensler believes to be analogous to stocks in the companies that issue said stablecoins. This makes absolutely no sense in the context of the Howey test because stablecoins are pegged to fiat currencies and therefore carry no expectations of profit.

These inconsistencies have left many crypto projects crypto companies and even pro-crypto politicians asking what kind of criteria the sec is using to classify coins and tokens as securities. If you’ve read any of our articles about the sec hearings you’ll know that the sec ain’t answering.

All the while the sec’s scrutiny of the crypto industry has been increasing with the regulator starting to target cryptocurrency exchanges like Coinbase over its alleged listing of securities, a move which could do serious damage to the crypto market while killing the coins and tokens in question. It looks like there’s no stopping the sec now that it’s on the warpath and that means the only thing we can do as crypto holders is to try and best assess which cryptocurrencies the sec is likely to target and which cryptos are at risk

The sec’s complaint against a Coinbase employee who allegedly leaked information about upcoming crypto listings on the exchange to his brother and best friend bagging them over 1.1 million dollars. If you check the complaint document you will see in that document that the sec classifies 9 of the 25 cryptocurrencies that this trio allegedly used for insider trading as securities. Something that made the crypto headlines and something that may have even served as the springboard for the sec’s aforementioned investigation into Coinbase over securities listings.

Which cryptocurrencies that SEC will target? In any case, the sec’s analysis of these nine cryptocurrencies could offer some clues as to what criteria it’s using in practice to pounce on crypto projects. The sec notes on page eight of the complaint that it uses the Howey test to classify cryptocurrency as securities which is clearly not the whole story. According to SEC mentioned on page 22 each of the nine crypto asset securities was offered and sold by an issuer to raise funds for the issuer’s business.

In other words, the entities behind these crypto projects conducted ICOs and planned to use the proceeds to build their products. In the next paragraph, the sec further adds that quote the issuers and the promoters of these cryptocurrencies made statements on social media and elsewhere claiming that the price of the coin or token will appreciate due to the direct efforts of the entities behind these crypto projects.

Related: SEC US charges 11 individuals over $300M crypto ‘pyramid scheme’

So the first cryptocurrency on the sec’s hit list is flexor network’s amp token and there are 8 others in a list which include RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.

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