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A small victory for financial regulators: what will happen to the crypto industry next?

The international program on combating cryptocurrency fraud started only a few days ago but has already yielded tangible benefits. The rate of bitcoin in just a day fell by almost 10% and stopped at around $ 7,300. This can be called a small victory for financial regulators.

29.May.18 9:28 PM
By Jeff Bannister


A small victory for financial regulators: what will happen to the crypto industry next?
Why the Cryptosweep operation is important

The Cryptosweep operation was started by financial institutions of the USA and Canada. The event involves the North American Association of Securities Administrators (NASAA), the Department of Trade and Insurance of the State of Tennessee (TDCI), and the Securities Committee of the State of Texas (TSSB). NASAA initiated a series of investigations into fraudulent ICOs that skillfully manipulate information and attract huge amounts. Only in the first month of the Office did 35 cases and examined 70 applications. The Securities and Exchange Commission (SEC) highly appreciated the first results of Cryptosweep.

According to the consulting agency ICOS Satis Group, the goal of more than 80% of ICO is fraud. In part, this is due not only to the high number of fraudulent ICOs but also to the lack of legislative regulation in this area. Such skepticism is justified because only 8% of ICO projects successfully implement their plans and demonstrate the dynamics of development. The rest for different reasons fail. Even if the project is not initially a fraudulent scheme, without security in the form of securities, the law can not protect the investor. The task of financial regulators is not only to monitor and control cash flows but also to ensure the protection of investors. SEC initially equated tokens to securities. The exception is the only bitcoin because it is entirely anonymous. This is more than once hinted at by SEC chairman Jay Clayton.

Securities or commodities?

This step can be called erroneous because the regulation of one sphere immediately creates other problems. The Securities Act requires full financial information from issuers about their own business and potential risks. For this reason, even the creators of Ethereum and Ripple refuse to recognize the tokens as securities, because this will negatively affect the popularity of the cryptocurrency. Besides, the platforms in this period would have to limit their activities. However, both the Ethereum Foundation and Ripple Labs have already faced collective claims for violating the Securities Act.

Ripple Labs is accused of selling unregistered tokens, although the creators themselves deny this fact, referring to the very philosophy of XRP.

The Ethereum Foundation is accused of selling crypto-lattes as securities in 2014, which is why investors started buying airs in the hope of venture capital investment. This process is essential in that it will determine the legal status of the broadcasts. If tokens are recognized as a commodity - there is no need to expect global changes. However, if ETH is identified as a security, the company will have to obtain a license from the Commodity Futures Trading Commission (CFTC). This will affect not only the crypto industry but also the business that accepts digital coins for payment.

What are the consequences

In fact, the recognition of securities will create some additional problems for business. The very idea of ​​using tokens in industry implies the possibility of paying for goods or services. That is, in fact, acquiring tokens, the buyer already knows that it stipulates the number of services rendered to him and its value from the seller. In this case, the number of tokens is limited and not tied to a fixed rate. For each service, suppliers have their tokens. Thus, consumers must monitor the course of these coins, although all tokens are purchased either digitally or for another currency. Tracking different currencies whenever there is a need to use the service is problematic. Given the volatility and high commissions for such services will be low demand. It is much easier to use fiat money. In the crypto industry in part in the role of fiat money is ETH. Most ICOs are conducted on Ethereum. Thus, recognition of the token as security will require disclosure of data for all investors and further complicate their use. Moreover, in general, it can put an end to the ICO procedure itself.

The desire of financial institutions to develop rules for the regulation of cryptocurrency is understandable and reasonable. However, the crypto industry has already proved that the existing regulations of the stock exchange for it are difficult to apply.

In more detail, the G20 countries will discuss this issue in July. In the future, the course of the Cryptocurrency will largely depend on these decisions.

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