The CEO of an altcoin project, which is among the top 150 by market capitalization, announced that they are working to register with the SEC.
Although this altcoin is not a security, it plans to register with the SEC
Gene Hoffman, CEO of Chia Network, argued that its network-native token XCH is not a security, but that the company is working to register with the US Securities and Exchange Commission (SEC). “Everything but Bitcoin is securities,” SEC Chairman Gary Gensler said on February 25. He argued that all crypto tokens other than Bitcoin have a team of projects working to promote the tokens and attract investors.
In response, Gene Hoffman, CEO of Chia Network, said that Chia’s native token ‘XCH’ is not a security. He argued that XCH was not sold to the public, a necessary condition for classifying securities according to the Howey Test. According to the Howey Test, a token is considered a security if it has “money invested in a partner organization with reasonable expectation of profits from the efforts of others.”
Chia will register its native token XCH with the SEC
Hoffman added that the company plans to register the native token with the SEC to legalize its operation. However, former Ripple developer Matt Hamilton said that the stock registration did not prevent the SEC from going after Ripple. Hoffman explained that Chia’s situation is different from Ripple’s, with the latter selling XRP without a registration statement:
Selling a token without a registration statement around can convert a token into a security. Therefore, do not sell them without a registration statement.
Hoffman added that he wouldn’t be surprised if Ripple loses its lawsuit against the SEC, as XRP is sold without a registration statement.
Can other altcoins/tokens be classified as securities?
The key issue, according to the Howey Test, is whether the SEC classifies an investment in XRP as a contract where profits are “received from the efforts of others.” This is currently a gray area due to the decentralized aspect of cryptocurrencies. The SEC has previously launched investigations on Binance’s BNB token and ApeCoin, which supports Bored Ape NFTs. cryptocoin.com As we reported, US regulators have been putting pressure on crypto exchanges for a while.
In summary, any other securities lawsuit, like the SEC and Ripple lawsuit, can change the regulatory landscape for the crypto market. It is clear that the SEC wants to be the chief regulator of the market, and the move against Ripple was the first step to classify all tokens as securities.
If Ripple loses the case, the SEC could fine multiple crypto projects. For Ripple, a loss could negatively impact the project and its managers and open the door to a tighter industry environment.
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