Until the new presidential administration takes office, the digital asset industry was involved in an existential confrontation with the American Securities and Exchange Commission. For years, the SEC has carried out a regulatory campaign by burnt on the digital asset industry and its most used platforms so as not to adhere to confused – or non -existent – rules – on what constitutes a guarantee and which must register to buy and sell them. Now, under a new direction, the SEC has confirmed the end of its regulatory era by application.
Although this change has considerably reduced (but not eliminated) exposure to regulatory prosecution of the agency, the industry must prepare for private applicants to exploit federal laws in matters of securities by applying the laws on federal titles by providing proceedings in matters of hand violation of securities.
The application of the dry must turn around
Under its new direction, the SEC confirmed the end of the era of the regulation by application and has taken important measures to progress its political objectives, in particular the emphasis on bad actors and fraud in the space of digital assets. The most important quarters of regulations include:
- Crypto working group: One day in his mandate as president of the SEC, Commissioner Uyeda announced the training of a “crypto working group” and, in doing so, publicly recognized what so many people have been saying for a long time: the refusal of the dry to promulgate the rules and to regulate instead by applying in an important, important way, of the confusion on what is legal “, including” which ” important way, how To register. The declared mission of the crypto working group is to clarify these questions and develop a regulatory framework for digital assets. He organizes a series of round tables in the industry, with the first to focus on how to define digital assets are titles. .
- Cyber and emerging technology unit: The SEC has replaced cryptographic assets and cyber-unit with the cyber unit and emerging technologies (“Cetu”), which focuses on the protection of “retail investors against bad players”. The SEC announced that CETU and its 30 fraud and lawyers’ specialists (against over 50 years) would focus on “[f]Raud involving blockchain technology and cryptographic assets ”among other priorities.
These changes indicate that the application of the dry in the space of digital assets will undoubtedly decrease, since the agency will no longer use its application arm as a main means of creating a regulatory policy and its associated reduction of the staff focused on blockchain and cryptographic issues. According to the SEC, its staff remains determined to continue the bad actors and complaints based on fraud, Commissioner Hester Peirce specifying that the change of priorities and resources is not the end of the application of the SEC and that “the statutes already on the books do not allow everyone”.
Unstable law is an opportunity to dispute
Faced with the retirement of the drying of the dry, individuals and companies should be prepared for private complainants to exploit the vacuum of the application. Historically, the bar of private complainants intervened to continue a dispute following a decrease in the regulatory application (or at least its perception of it), whether they are proceedings alleging the violation of antitrust federal laws or financial misconduct in violation of securities laws after the 2008 crisis. These private combinations, often brought as a collective recourse Expensive for companies and their founders (often named as defendants themselves) – even for those who prevail at an early stage.
In the space of digital active ingredients, private complainants can always use federal securities laws as a basis to provide a variety of allegations, in particular:
- Sell unregistered titles;
- engage in the sale of titles by means of a prospectus (for example white paper) containing false statements or omissions of material facts;
- Fraud in securities and other misconduct (for example, carpet prints or pump-and-dump diagrams);
- Violations by people who have decision -making control over the seller, such as founders or business leaders
Private complainants can also pursue alleged violations of state securities laws and other causes of action in Common Law.
Although the new interpretation of the dry of the laws on securities is more aligned with the thought of the industry, it does not link the courts analyzing the question of whether a digital asset is security. For example, the private complainants continued the Tron Foundation and its founders, alleging that they had misleaded investors by promoting, offering and selling TRX – alleged security – in violation of federal laws and securities. At the end of last year, the American district court in the Southern District in New York in part rejected the request of the defendants of rejection and, in doing so, explained that the previous frame of the SEC to determine whether the cryptographic assets were titles was a “interpretation not linked to a legal standard”.
And while the decisions of the appeal courses link the courts below, the SEC recently rejected an action (involving Coinbase) which was being examined in appeal on the question of whether the transactions of cryptographic assets are qualified as titles. Another similar costume should be rejected soon. This means, for the moment, that the lower courts will continue to run out of advice from a superior court on this issue, leaving private applicants free to argue that federal securities are applied.
Consequently, companies should expect an increase in private disputes. An area to watch is the coins. Although there are persuasive arguments to explain why the pieces even should not be considered as titles, private applicants are sure to argue that the circumstances of a particular piece of memes introducing it in the field of federal laws on the securities.
This year was mainly positive for the digital asset industry. He escaped the grip of an agency which was apparently determined to crush it. But companies and their founders reassess their legal risk should give their legal teams if they can be targets of an increased private dispute, so that they can create strategies to mitigate such an exposure.
