As the cryptocurrency markets continue to sink to alarmingly low levels with almost all digital assets at all time lows, it seems that investors are running to the safe haven of the stable coin. These are mushrooming like there's no tomorrow and probably it will only be a matter of time before the SEC in the US will turn its attention to this class of digital assets. It is quite obvious that the days of regulatory uncertainty when regulators and governments around the globe were only trying to understand the concept of cryptocurrencies, let alone the legal frameworks according to which they should be regulated, are long gone. One by one, the U.S. financial regulators seems to be figuring out how to classify and, by extension, how to regulate cryptocurrencies.
Perhaps the most fearsome of all regulators for the cryptocurrency community, the U.S. Securities and Exchange Commission, is waging an all-out war on dozens of ICOs at this very moment. About a month ago, they settled charges against Zachary Coburn, the founder of EtherDelta, over operating an unregistered securities exchange. The total amount fined was almost $400,000.
That same month, the SEC fined two startups $250,000 each for not registering their ICOs as securities offerings. Airfox and Paragon Coin Inc. were also ordered to return all the money they raised – $15 and $12 million respectively – to their investors. This was the first action of such magnitude SEC has ever taken against a cryptocurrency company and it was based on the regulator’s 2017 report which basically classified ERC-20 tokens as digital securities. Technically, that includes ether too.
This means that ethereum and all the startups that created their tokens on the Ethereum platform will now have to fully comply with SEC’s regulations, apply for an exemption or face dire consequences. The SEC’s 2018 report already mentions ‘dozens’ of ongoing investigations, so virtually any startup that recently had an ICO is probably currently being investigated by the regulator. As of right now, SEC can only impose fines and nothing else, but many experts seem to agree on a wider cryptocurrencies crackdown being inevitable.
When it comes to bitcoin and other cryptocurrencies based on bitcoin’s source code, the situation is slightly different. Several court cases in the U.S. this year set the precedent of altcoins and bitcoin being viewed as commodities, which brings them under the jurisdiction of the Commodity Futures Trading Commission (CFTC). Just to hammer the point home, when Wall Street investment funds launched bitcoin futures trading, the CFTC posted a customer advice notice, where they clearly stated that bitcoin is a commodity and it will be regulated as such.
Clearly, regulators were keen to finally put bitcoin and ICOs – the poster children of the cryptocurrency world – into an appropriate regulatory framework for various reasons. Classifying bitcoin as a commodity clearly means that most other cryptocurrencies can be classified and regulated as such while obliging ICOs to register as securities offerings is an obvious step toward the protection of investors and their funds. Frankly, everyone should’ve seen this coming – too many scammy ICOs took off with too much investors’ money over the last several years.
Stasis Gregory Klumov and Maltese PM Joseph Muscat Stasis
The chances are that stablecoins are next. Gregory Klumov, the CEO of tokenization platform STASIS —which was behind much of the Maltese legal framework for digital assets—argues that new regulatory approaches are a must for this emerging asset class: “When cars were disrupting horses 100 years ago, humanity did not have a clue about what speed limits to impose on drivers, so people were given rights to experiment and figure it out.” .
Klumov added that the STASIS Foundation continues to develop institutional-friendly infrastructure to tokenize assets. Its flagship product EURS more than doubled its amount in circulation and monthly transactions in November with third-party custody and frequent verifications will be joining the ecosystem shortly.
We also spoke to a number of stable coin officials on their projects and how, in their different ways, they are changing the cryptocurrency markets as well as what they expect in 2019.
Ken Lang, ndau Collective Member and CTO of COSIMO Ventures
ndau is a buoyant digital currency, built by Oneiro, to optimize long-term store of value and assets which are supported by a decentralized ecosystem. Unlike stablecoins, ndau is not pegged to fiat currencies or commodities, allowing for more desirable characteristics for long-term holders in particular.
The story of ndau starts about five years ago, when an anonymous group of early bitcoin enthusiasts and experts — now called the ndau Collective — saw that blockchain and Bitcoin had a big future, but a few barriers holding it back from being all that it could be. Some of these largest barriers were volatility, dependability, and governa...