Expect the SEC to Target More Token Exchanges After EtherDelta
The Securities and Exchange Commission's agreement with the founder of EtherDelta is the first of many enforcement actions for cryptographic token exchange.
Until recently, the SEC's survey of the cryptocurrency industry focused primarily on projects and teams that raised funds through the Initial Coin Servicing (ICO), which is likely to violate securities laws. But a person familiar with the SEC's mind told CoinDesk last Thursday that the password trading platform was a critical priority for the agency's executive department.
As such, the news that the SEC has encouraged EtherDelta founder Zachary Coburn to run an unlisted stock exchange can be seen as a scene across the bow of a token trading platform.
"If you are exchanging password assets that deal with Americans at this point, you need to take no action as to whether or not you are involved in securities laws, or you need to get clarification from your counsel." Andrew Hinkes Associate Professor, Law School, New York University.
And while the EtherDelta action was the first action on the SEC's password exchange, Hinkes told CoinDesk:
"It's amazing how long it took."
It also means that no one is responsible for their activities, even if the so-called decentralized exchange (DEX) can not be closed easily. Without acknowledging or denying the charge, Coburn agreed to pay a total of $ 388,000 in fines, disgorgement and interest under the agreement.
"It would not be handled differently by exchanges that use a distributed set of nodes instead of a centralized server," Hinkes said. "Since you have created it and it is operated by a dispersed network of other people, it does not mean that the responsibility or responsibility of the future has disappeared.
In particular, although he left EtherDelta at the end of 2017, actions were taken against Coburn. The ether-based token transaction on the platform cited by the SEC departed between July 12, 2016 and December 17, 2017. .
"Whether you're selling a business a year or a couple of years ago or not," said Preston Byrne, a partner at law firm Byrne & Storm. "The US securities law will be enforced," he said.
On the other hand, Coburn's punishment is only a fine of less than six dollars. He did not prohibit participation in the capital market because he worked with the SEC, which would like to contact the agency first, the SEC, which would be run by another individual or a similar platform.
"The entrepreneur worked perfectly with the commission in this case, which is often a good idea," Burn said. "It shows that the SEC is willing to work with people who are willing to work with them."
Decentralization is relative.
Since the token-selling episode in 2017, ethereum-based assets have often been replaced by licenses and numerous DEX platforms have emerged.
According to DappRadar, IDEX, the leading DEX platform, had approximately 1,401 users in the last 24 hours. In particular, with regard to EtherDelta, we have had about 1,079 transactions in EtherDelta over the past 24 hours, about 11% less than the previous 24 hours.
Although the SEC has not clarified tokens that traded on EtherDelta are considered to be securities, this measure implies that the regulator takes into account the responsibilities for deliberately distributed technology.
Saying that the SEC order and how it relates to the most common form of ICO token, ERC-20 said Hinkes:
"He said he found the company, created and distributed smart contracts, and completely and exclusively controlled the work, so he knew that his actions would contribute to the breach of the law."
In the mind of Hinkes this opens up a variety of legal questions for developers who contribute to ethereum and bitcoin. He said writing and running code alone could be ignored if technicians who were vulnerable to future legal action were to neglect restrictions on how to use the software.
"EtherDelta was able to filter out specific tokens," Hinkes said. "Otherwise, they opened themselves up for everything, including securities issued under the ERC-20."
Stephen Palley, a partner at Anderson Kill, a Washington, DC-based law firm, told CoinDesk that by reading the order, the majority of EtherDelta was "from the purchase"
Fight or fly
From Byrne's point of view, the enforcement action of the SEC allows the cryptocurrency company to avoid operating in the United States.
"There is an overseas hub (Singapore, UK). This law is much more favorable to ICOs and tokens." "The main task of decryption entrepreneurs is how to maximize opportunities in US jurisdictions, limit exposure to US regulatory agencies and comply with US laws when we do business abroad."
On the other hand, US-based DEX AirSwap seeks to create an opaque regulatory environment by working with licensed securities dealers and avoiding order books.
AirSwap co-founder Michael Oved said in an interview with CoDesk: "Unlike other platforms, AirSwap is not engaged in exchange activities, there are no order forms, no order matching, no transaction fees." Our approach is to seek advice, It was to act. "
Many exchanges in the United States, including AirSwap competitor Everbloom, do not charge a transaction fee to reduce legal risk. Hinkes said that this recent order could weaken that approach.
"It does not seem to be related to an analysis of whether a fee is being paid to act as an exchange that EtherDelta is registered with or exempted from exemptions," Hinkes said.
This degree is certain. The SEC did not end with a regress of the industry that Palley compared to the 5th play.
"There are dozens of investigations going on, and there will be more press coverage and more enforcement action," he said. This obviously does not seem to end anything. This is probably the end of Act 2 and the beginning of Act 3. . "
Jay Clayton SEC President, Images through YouTube
CoinDesk, a leader in block-chain news, is a media outlet that pursues the highest standards of journalism and adheres to strict editorial policies. CoinDesk is an independent operating subsidiary of the Digital Currency Group, which invests in cryptocurrencies and block-chain startups.
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