With the US Securities and Exchange Commission (SEC) restrictions for these altcoins, the pressure on the cryptocurrency market continues. cryptocoin.com We have compiled the altcoins that the SEC plans to restrict for you.
Securities claim for these altcoins
In a Twitter thread, Adam Cochran raised questions about the SEC’s latest allegation. The Commission wants to claim that BUSD is a security by spoofing the Howey Test, which determines whether a transaction qualifies as an ‘investment contract’.
This directly indicates that the SEC believes there is an expectation of ‘profit’ by investing in a stablecoin. Meanwhile, experts argue, “Securities is a much broader category defined by the Securities Act of 1933. But the actions of the Commission prove how vague the law is.” said.
Assets like bonds, certificates of interest, proof of indebtedness, and more hold essential treasures that make them more like a money market fund. This exposes the owners to security, even if the owners do not profit from it. While this also raises the argument that they could be securities.
Is the SEC heading in the right direction?
Experts imply that people who say the SEC misunderstood should reconsider as the commission failed the BUSD Howey Test because he was a very knowledgeable securities advisor.
Now the question here is how can it be a security if one doesn’t earn from it. You don’t need good or lucrative security to be safe. Also, Cochran suggested that if someone is holding or securing something of value to them, you can trust that they will do so, while not being exempted otherwise.
Move towards DeFi applications
The cryptocurrency market tumbled last week, sparking concerns over multiple regulatory action, Bernstein said in an investigative report on Monday, as the SEC accused crypto exchange Kraken for offering its ‘staking-as-a-service’ program as an unregistered security.
The report stated that the allegations against Kraken were related to the exchange’s special program. The real question, according to the report, is whether staking itself is a security, or is it specific to the way Kraken delivers and markets the program.
Analysts Gautam Chhugani and Manas Agrawal said, “Even if the issuer allows users to actively stake, stake their crypto, and operate on a pass-through basis on both returns and costs, even if they provide specific disclosures about yields, they will go after all staking schemes of the regulator. The question of whether it will fall remains unanswered.” they stated.
Bernstein says the regulator’s decision to ban all staking programs may not be easy, and some firms may decide to fight back against the regulatory stance. The broker stated that the crypto industry still argues that “the absence of crypto-specific guidance or regulation will continue to hurt even good players who choose to offer transparent staking services that would not classify as securities on their own under the Howey test.”
Securities classification
The Howey Test relates to the U.S. Supreme Court case to determine whether a transaction qualifies as an investment contract. If a transaction is considered an investment contract, it is classified as a security.
After the Fed rejected Custodia Bank’s application to join the Federal Reserve System and the SEC’s decision to issue a Wells notice, there are growing concerns that more serious regulatory action aimed at ‘strangling fiat on ramps towards crypto’ is in the pipeline, the report said. The top 10 stablecoins are indicated in the image below.
Bernstein asks whether this heralds a move against other major stablecoins such as USD Coin (USDC) and Tether (USDT) or whether it is specific to BUSD. Bernstein said the regulator saw Binance International as out of his control and therefore preferred to ‘rein in BUSD through Paxos’.
Such regulatory overreach will result in ‘more movement towards decentralized finance applications built on-chain by anonymous teams,’ the note said. Regulators will find it even more difficult to follow this ‘regulation-by-app’ approach against thousands of DeFi founders without providing a transparent framework. On the note, growth will continue in more crypto-friendly jurisdictions such as Singapore and Dubai, as well as new potential hubs such as Hong Kong and London. In the image below are altcoins following the top 10 stablecoins.
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