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In the past two weeks, there have been some notable events. The first went almost unnoticed and did not arouse the interest and comments that he should have. The second one just happened on May 3rd and will probably start attracting attention in the next few days if and when people will digest the implications.
The first event is the speech by former CFTC Chairman Gary Gensler to [19459009The23AprilGenslersoutputedtheSEC'spositionontheOICclaimingthat" Many initial offerings of money, probably well over a thousand, many crypto exchanges, probably 100 to 200, basically work outside of the US law ". He added that he expects that "2018 be year to start to bring this kind of more than 1000 tokens "and that" when and not if, is the only question ".
He adds that with the exception of bitcoin, bitcoin-cash and litecoin (which are not titles), Ripple, Ethereum, NEO and EOS can also be considered securities.
The second event occurred on May 3 and it is a class action filed against XRP II LLC, Ripple Labs and its CEO Garlinghouse for the alleged unregistered sale and offering of securities in violation of the US Securities Act and the California Corporate Code .
I will not comment on the legal aspects of the trial, which is important, it is to understand what it means for the sector.
There are two aspects: the first is what the regulators will do and the second is what are the practical consequences of the regulator's actions.
On the first aspect, the SEC has several ways of approaching the issue – from the leanest to the most draconian – like trying to retroactively enforce these "1000 plus ICOs", getting the disgorgement of any money or product of illegal activity, impose civil sanctions against trade, promoters, advisers or anyone who has sold or even evangelized these ICOs. All this without even considering the independent criminal prosecution that can be brought by the DOJ and the various US Attorney's Offices.
Even though it concerns mainly US-based ICOs, EU-based ICOs can not dream because (i) it is unclear how European regulators will act and be safe. They will follow the steps of the SEC. (ii) it is enough for an American citizen to buy a token and even an ICO based in Gibraltar or Malta begins to feel the pressure of US authorities who are well known for their extraterritorial excess – most of the time illegal – (ask simply to the Swiss bankers he).
The coming crackdown is however only one flip side that everyone is looking at, but this is by no means the most important nor the most likely of all. 39 have the heaviest implications for the market.
The second aspect is probably much more important and it is well avalanche of lawsuits that the regulators approach will trigger. Any dissatisfied investor who has suffered losses is now legitimate to pursue and recover his money because the AITs have not complied with applicable securities laws.
Of course, this is not the first class action brought against ICOs – in addition to Tezos, I could count five filed between the end of 2017 and the beginning of the year – Centra, Monkey Capital, ABT Corner, Giga Watt and Paragon Coin. But what's relevant here is the acceleration of the trend and the moment Gensler talks about Ripple as a security and lawsuit. Therefore, this lawsuit may signal the acceleration of a trend that will have – citing Gensler's words – " a crippling effect on this sparkling market of the I & # 39; ICO. " Also note that even though the EU regulators did not take a position clearly like the SEC, they did not legitimize the ICOs (except Switzerland, Gibraltar or Malta), so an ICO based on the EU runs the same risk as token symbolic buyers is effectively a guarantee under EU laws and the issuer has not complied with the securities laws of the EU. l & # 39; EU.
It is felt that the industry takes these events too lightly and does not prepare or plan for future problems. These "1000 plus ICOs" should set up crisis management teams to assess the legal risks to which they are exposed and the measures they will have to take to limit – as much as possible – the damage. The consumer industry does this regularly with product liability issues because they know that if nothing has been done, the risks will be too high for the company. But the OIC industry is too young, players are relatively inexperienced and probably intoxicated by the rapid wealth and easy success.
For better or for worse it will not last and it may be the last calm before the storm.
Disclaimer: The opinions expressed in this article are those of the author and do not represent those of NCC. ©
About the Author: Andrea Bianconi is an international business lawyer with more than two decades of experience, a scholar of the Austrian economy, monetary history and geopolitics, a believer in the future of technologies based on Bitcoin and Blockchain, a trader with an interest in commodities, metals precious, currencies, Tech values and Cryptos. A speaker / panelist at conferences and events.
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