[출처: 셔터스톡]
Whether it is the traditional industry or the cryptocurrency industry, there are not a few cases of succumbing to the iron fist policy of the US Securities and Exchange Commission. Following a six-month tug-of-war with the SEC, followed by Nasdaq-listed Luixing Coffee in China, which paid a fine of $180 million for accounting manipulation, Telegram eventually returned $1.22 billion to investors and paid a fine of $18.5 million. It is an example. Recently, Ripple was prosecuted by the SEC and wanted to face it head-on, but it also made a gesture of reconciliation that it was ready to consult with the SEC.
SECHas an absolute say in the field of innovation as well as the survival and development of companies. Regarding this, “From the perspective of the growing cryptocurrency industry, the SEC is like a bomb with no fixed time limit, and we do not know when and who will be the next hitter.” PA News focused on the issue of replacing the SEC head on January 19 (local time).
# SEC, born in the era of the Great Depression, now aims at the cryptocurrency market
‘Known as’fast, accurate, and ruthless’, the SEC has made a huge contribution to reform and maturity of the US stock market. Prior to 1933, there was no official law banning insider trading. Therefore, various insider trading, stock price manipulation, and investor pressure in the US capital market were as confusing as the current cryptocurrency market. At the time, there was a saying on Wall Street that “the insider trading is the only magical weapon to win an investment.”
1929On October 29, 2009, the US stock market crashed. The decade of the Great Depression had begun, and the US economy and financial system were hit hard. To investigate the cause of the crisis, in 1933 the US Congress organized a historically renowned Pekora Hearing. At the hearing, various insider transactions that had only been rumored in the US stock market were exposed. The US Congress passed and in turn to revive the stock market and set up the SEC to oversee the implementation of securities regulations. The SEC itself is the product of the Great Depression.
The SEC, an independent Congress-approved agency and the highest agency in the US securities industry, has quasi-judicial, compliance, and independent law enforcement powers without interference from other government agencies. The SEC committee consists of five members, and the chairman is replaced every five years and appointed by the President of the United States.
With the popularity of cryptocurrencies in recent years, the SEC has begun to focus its attention on the regulation of the cryptocurrency market. Cryptocurrency belongs to an emerging market, but the SEC has not changed the rules of the securities law and is still using the Howey test, created about 75 years ago, as a touchstone to determine whether cryptocurrency issuances are classified as securities. The subtest mainly judges on four aspects: whether capital investments are involved, investments are made in one common company, whether investors expect to make a return, and whether they are entirely dependent on the efforts of others other than investors. . Once these conditions are met, the digital asset is classified as a security token and is regulated by U.S. securities laws. Essentially, all other assets other than Bitcoin and Ethereum, which the SEC has specified as utility tokens, are likely to be basically securities tokens.
If a cryptocurrency project passes the subtest, it means that it must undergo the same strict supervision as securities. If a project does not qualify for issuance, it faces serious legal risks. With the SEC beating the regulatory baton, it can be said that cryptocurrency has entered the stage of strict securitization supervision. In 2019, the SEC collected a total fine of over $4.3 billion through law enforcement, of which cryptocurrency assets accounted for about 10% of the total amount. In 2020, the SEC recovered a total of $46.8 billion in fines and illegal profits through 715 actions. Fines over 25% of them (including $1.2 billion returned to investors) were all incurred in ICO projects.
# SEC ‘Full-fledged operation of’tollgate’ mode, project pays fines and lives after reconciliation
For now, paying money and reconciling seems to be the’best solution’ to survive the SEC’s regulatory crisis.
SECHas filed a lawsuit against Block.One early in September 2019. According to the indictment, Blockone has provided investors with false and misleading information about EOS. EOS is a kind of unregistered securities provided by Block One. The terms of the agreement set by the SEC in this case were that Block One had to pay a $24 million fine. With Block One’s immediate consent, Block One gained a significant exemption for future business. From Block One’s point of view, the fine was just a 6,000-thousandth of the total capital stock.
According to unofficial statistics, between 2017 and 2020, the SEC prosecuted at least 32 cryptocurrency projects, with a total fine of over $140 million. Among them, Tezos, Block.one, and Telegram are among the top 3 fines.
In fact, one of the main reasons these projects chose to reconcile is that negative impacts can easily lead to chain reactions and tide on the company. For example, the news that TRON is being investigated by the SEC the other day triggered a plunge in the price of TRON’s token TRX and embarrassed investors. The Tron Foundation and its founder Justin Sun denied this and explained that “TRX was not sold directly or indirectly to any US citizen,” but the effects of the SEC were undoubtedly huge.
Another example is Ripple, the SEC’s new hunting target. “Ripple violated the’prohibition of selling unregistered securities’ law while selling XRP to investors.” As the news spread, the price of XRP, which was the third largest in the cryptocurrency market value, plummeted, and the delisting exchange also surged.
SECAccording to the prosecution of Ripple, the initial fundraising of Ripple had not registered the price and availability with the SEC, and did not meet any registration exemption conditions, violating federal securities law registration rules. The SEC’s action means that it will take a closer look at other digital assets within the scope of actual jurisdiction, which is believed to accelerate industry compliance. If there is an agreement between Ripple and the SEC, this will serve as a useful experience for other projects, but the current situation is not very optimistic.
However, even if you pay money and make reconciliation, you cannot see the development of the cryptocurrency project only optimistically. For example, Telegram’s blockchain project, the largest in the history of ICOs, was left to the SEC’s involvement and had to provide paid services due to lack of funds. EOS founder BM resigned, saying, “I no longer want to be subject to regulatory restrictions on innovation,” which triggered a decline in the price of EOS. It is difficult to see that reconciliation from this point of view can extinguish a real disaster.
# SEC, Accelerating the’siege and deterrence’ of the cryptocurrency industry
SECIs far more active than we thought and is investigating more projects and companies. A few days ago, Adam Cochran of Cinneamhain Ventures tweeted, “(SEC) is primarily aiming at large projects and has been confirmed to be investigating at least one large project, but has not yet entered the litigation phase. It seems that it is in the active investigation stage.”
Dovey Wan, co-founder of Primitive Ventures, said recently that “SEC will be very short of funding in 2021 and will continue to lay new tiles in the first quarter of this year.”
SECExecutes an independent budget. The procedure is that after the Federal Budget Office reviews and approves the annual budget, the President submits it to Congress and passes it for deliberation, and the Budget Office pays the funds for operation. With the US fiscal deficit in 2020, both parties in the US Congress are hoping to tighten their budgets. This means that the fastest and biggest fiscal tightening in history could occur in 2021. When the SEC’s funding shortage comes, it inevitably affects the law enforcement process.
SECOne-third of the annual budget is spent on law enforcement, according to the company’s annual report. Among them, programs that provide monetary incentives to whistleblowers are the main law enforcement tools the SEC currently uses to prevent fraud and protect investors. Since 2011, the SEC has recovered more than $1.4 billion from violators through a whistleblower program. In 2020 alone, the SEC paid $175 million to 39 informants, the largest amount in the fiscal year to date. The incentives received by whistleblowers are provided by the Investor Protection Foundation, while funding from the Foundation comes from fines imposed on criminals by the SEC.
If funding is scarce, the SEC can target more cryptocurrency projects or companies for investigation. “One of the core logics that SEC collects money is summarized as’high hit rate + large scale of unfair funds,'” Dobi Wan said. “Because I can not.” She also noted that “Coinbase will be conducting an IPO in the near future, so we will have to clean the door before the IPO.”
In an interview with PA News, director Gu Yanxi, founder of a US research and consulting firm, said, “The SEC sets priorities for the year when it starts working at the beginning of each year. This includes cases with plans for prosecution. Then, according to the work plan, personnel are assigned and executed step by step. After that, the SEC takes reliably measures to monitor the medium and location of transactions.
SECAs the responsibility of the company is to ensure the safe operation of the US stock market, how much impact the project will have on the US stock market is the key point of the SEC filing a lawsuit. Of course, when the SEC takes action, it largely depends on what the project will face in the future. In the case of a small project and an obvious violation, the SEC’s regulatory action will be terminated quickly. For them, this is not only a punishment for the project, it also serves as a warning to the market.
“The greater the impact of the project, the more vulnerable it can be to the SEC’s regulation,” said Wijaning, a blockchain expert and president of Huobi University. “Analysis of Ripple and previous prosecutions shows that the SEC is paying more attention to projects in the cryptocurrency industry with high market caps, large-scale financing or overly centralized economic models. These projects are “It has been in the industry for a long time, and its influence is relatively large, so it is inevitable to receive more attention from the SEC. However, Bitcoin and Ethereum, which are specified as’decentralization’ projects, are already excluded from the view of SEC regulation.”
# SEC Chairman change, will a new phase unfold in the cryptocurrency industry?
OneOn January 19th, US President-elect Biden officially nominated Gary Gensler as the new SEC chairman. Former SEC chairman Marc P. Berge, who prosecuted the Telegram ICO project, filed a $1.3 billion lawsuit against Ripple Labs and two founders. Now Ripple’s lawsuit has been turned over to Gary Gansler.
Gary Gansler has a lot of background. From 2009 to 2014, he served as chairman of the American Commodity Futures Trading Commission (CFTC) under the Obama administration, and also served as vice minister of finance under the Clinton administration.
“Of the three major financial regulators in the United States, the SEC is the most conservative in the cryptocurrency market. As Gary Gansler became the new chairman of the SEC, the SEC will move more actively, and the position of financial regulators will also be on the cryptocurrency market. “It will be positive for encouraging the normative development of the cryptocurrency market,” he pointed out. “Gary Gansler goes on to say, “Gary Gansler has problems that need to be addressed and improved in the cryptocurrency sector, especially in the marketplace.” He explained that he is very knowledgeable of the regulatory policy,” he explained, and “after taking office, he will certainly promote the development of cryptocurrency digital finance, including oversight for factors inconsistent with the regulations of the existing market, and a more rational way to encourage market innovation. We will establish a policy. Predictably, the US cryptocurrency digital finance is expected to accelerate its development from 2021.
Indeed, Gary Gansler has repeatedly expressed a clear view of cryptocurrency. Accordingly, cryptocurrency exchanges will also be subject to regulation. They must register and operate within the limits of the SEC.
“In light of his past remarks, his interests are focused on taxation and investor protection, so if he takes over, the SEC’s legal regulation of the digital asset industry will accelerate,” said Wizaning.
“It is very likely that SEC’s regulatory action will not have a clearly negative impact on the price of bitcoin, but rather, funds from more institutions that value regulatory compliance may be allocated to derivatives including Bitcoin and Ethereum. However, in the case of other digital assets, it is urgently necessary to consider how to comply with the legal framework of each country within the scope of the business, and how to order it in an orderly manner on the premise of regulatory compliance. It is longevity, and risk management should be the core foundation.”
One issue to point out is that the reason why applications for bitcoin ETFs in the past were rejected by the SEC was the risk of market manipulation and the lack of regulatory protocols between exchanges. If so, if Gary Gansler and SEC member Hester M. Peirce, who is called a crypto mom, stand on the same side, could a new phase of the Bitcoin ETF decision be directed? “The SEC, led by Gary Gansler, will pass a bitcoin ETF application in a relatively short time,” said Mr. Nguyen City. “He has made it possible to represent securities and other rights in a form that promotes the use of encryption and digitization. It is expected to push forward with the revision,” he said.
In the process of institutionalization, the SEC’s accelerated intervention is expected to significantly eliminate the uncertainty of cryptocurrency oversight. “With industry regulation, the mainstream society and mainstream capital will be able to accept digital assets faster, and the inflow of traditional capital will become more mature,” said Wizaning.