SEC vs. cryptocurrency: the history of difficult relationships and the loss of idea

Over the past year, community representatives have closely watched the activities of the US Securities and Exchange Commission (SEC). Everyone was worried about whether the SEC recognized the token purchased at ICO as an unregistered security, whether the agency would sue the founders of a project, whether it would approve the launch of Bitcoin-ETF.

If we recall the original idea for which the cipherpunk community has fought for many decades and which formed the basis of Bitcoin, then such sensitivity to the SEC decision seems somewhat contradictory. Bitcoin provides users with financial freedom by eliminating all kinds of intermediaries and the lack of a single point of failure in the form of an empowered centralized organization.

However, for most of the community, the idea has either lost its value, or has not yet gained, or maybe both at the same time. In the cryptocurrency industry, alien ideas very quickly emerged as intermediaries, since people quite naturally did not want to understand the installation of a full node for getting bitcoins. You could even say that at some point the Mt. Gox has become large enough to be considered a single point of failure, and, as a result, the “Chekhov gun” worked, plunging the market into a two-year ice age [2014-2015].

With the advent of various platforms, first of all, Ethereum, the community has an alternative – decentralized trading and exchange platforms, where transactions are concluded through smart contracts, which theoretically reduces the human factor only to possible errors in the code of such a contract. So, probably, one of the most popular decentralized exchanges is EtherDelta. However, even the SEC long arms reached it.

The agency blamed EtherDelta founder Zachary Coburn for managing the unregistered national stock exchange, stressing that he had the leverage needed for that. It is also noteworthy that there have never been transactions with fiat currencies on EtherDelta, but this did not bother the SEC.

Coburn himself decided not to stand on the warpath and agreed to all sorts of fines, and community representatives held their breath in the hope that history would not become a precedent.

“If the system is really decentralized, then the SEC cannot harm it or bring it down. In general, there should not be a responsible person for whom you can sue. Coburn failed his test for decentralization and fell under the distribution, ”emphasized Gordon Einstein, partner at the law firm Crypto Law Partners, in an exclusive comment for ForkLog.

He added that the industry needs another Satoshi for decentralized exchanges whose identity will never be revealed and which recognizes the equal right of everyone to use their code.

“The case of EtherDelta is not indicative in principle, because fraud has indeed taken place. It was declared that this is a decentralized exchange created for independent market participants. In fact,
it turned out that specific individuals benefit from the exchange, namely, from unlicensed activities, ”says the head of the Nexada-based Simex Exchange, Boris Oxeniuk.

Perhaps another loud decision of the SEC was the fines against ICO-startups AirFox and Paragon, who agreed to register their tokens as securities, and also partially return the collected funds to investors. To some extent, this was a repetition of the Munchee case, but now startups must also pay $ 250,000 in fines.

The fundamental difference is that if the SEC continues to hunt issuers of unregistered security tokens, many projects will potentially have to return money to US investors in dollar terms in a market slump by more than 80%. This, in turn, can lead to a series of bankruptcies.

“It is necessary to understand that the token could be a security at the time of issue, but then change its properties. This was the case with Ethereum, which is currently decentralized enough not to be considered a security. Probably, AirFox and Paragon tokens remained securities, since startups went for a deal. The fact that American investors can claim their money back really threatens ICO-projects with bankruptcy. At the moment, the US is extremely hostile to the ICO, ”said Gordon Einstein.

If the case of EtherDelta worried more about cryptocurrency exchange operators that listed ERC-20 tokens that potentially had securities properties, if the well-being of specific ICO start-ups concerned only their investors and management, then the epic around the adoption of Bitcoin-ETF in the US captured the hearts and the minds of most of the community. The reason is obvious – if approved, the price of Bitcoin supposedly should go up, such a conclusion was made on the basis of unclear what.

10 years ago, Satoshi Nakamoto wrote about how central banks repeatedly betrayed people’s trust, and that Bitcoin could

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