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Will the SEC sue Uniswap?



The Uniswap project recently issued its token UNI. In view of the nature of this token, its issuance method, its target audience, and the fact that UNI has no less than 2,000 U.S. users, I think it is likely to become the object of prosecution by the U.S. Securities and Exchange Commission (SEC).

According to several dimensions of the Howey Test defined by the United States on securities products, if the holder expects future profits and achieves the appreciation of this product through the efforts of a common enterprise, then this product should be defined For securities, its mode of operation should also operate in accordance with the securities regulatory regulations.

Uniswap is developed and launched by a team. Previously, this project also received investment support from the capital. Moreover, there will still be a team responsible for the continued development of later operations. A part of the UNI distribution plan is allocated to the operation and development team and investors, and a part is reserved for future employees. Therefore, behind UNI, it can actually be identified as an ordinary enterprise working hard.

SEC Chairman: Cryptocurrency Platforms Need Regulation to Survive: SEC Chairman Gary Gensler warned on Sept. 1 that if cryptocurrency trading platforms do not heed his call to work within the U.S. regulatory framework , they will put their own survival at risk. Gensler said crypto assets are no different than other assets when it comes to public policy needs such as protecting investors, guarding against illicit activity and maintaining financial stability. The global cryptocurrency market cap is around $2 trillion, and at its level and nature, it needs to be within a public policy framework if it is to survive 5 or 10 years from now. Ultimately, finance is about trust. "

Gensler previously suggested that crypto trading platforms register with the SEC on the grounds that enough cryptocurrencies qualify as securities, but the crypto industry did not heed. Gensler said that "there are many operating platforms that can do better, but they But asking for forgiveness instead of permission. [2021/9/1 22:51:48]

In the process of obtaining UNI, users participate, and actually participate by investing funds. Although it is not a direct investment, they also obtain UNI by investing funds. And the purpose of obtaining UNI is for future appreciation expectations. So at least in these two dimensions of the Howey Test, UNI meets the definition of securities products. If UNI is considered a security, then its subsequent series of related operations will not meet the requirements of the securities law.

U.S. Stock Exchange: Cryptocurrency Exchange Did Not Disclose Whether It Provided Priority Service To Some Users And How The Platform Picks Cryptocurrencies: According to The Wall Street Journal, the U.S. Stock Exchange issued an announcement today about irregularities in cryptocurrency exchanges. In its announcement, the SEC said that cryptocurrency exchanges risked operating illegally because they did not disclose how they prioritized investor orders or how they chose which cryptocurrencies to trade on their platforms. Tyler Gellasch, a former SEC official who is now executive director of the investor-backed Healthy Markets Association, revealed: "The SEC not only regulates products, but also regulates where they are traded and traded." The SEC did not mention specific cryptocurrencies in its statement. exchanges, but cautioned investors that regulators know little about how exchanges actually work and whether they give some of their traders priority over others. While some of these platforms claim to employ stringent standards for picking high-quality crypto assets to trade, the SEC has not vetted those standards, the SEC said. [2018/3/8]

In addition to the above analysis of UNI attributes according to the definition of securities, other characteristics of UNI also make it more like a security. UNI's rights and interests include dividend rights and voting rights. This is only one title-zce away from the equity contained in the stock. In addition, UNI is already trading on multiple centralized matching trading platforms, and its trading method is the same as that of stocks.

The US Securities and Exchange Commission has issued a large number of subpoenas for illegal ICOs: a global regulatory wave is hitting virtual currencies, and initial digital currency offerings (ICOs) are no exception. According to overseas media reports, the U.S. Securities Regulatory Commission (SEC) has tightened its supervision on fraudulent ICOs, and has issued a large number of subpoenas to companies in the industry that it suspects may violate securities laws, including requiring companies to provide ICO pre-sales and sales. information. In addition to the Federal Reserve, the Thai government is also concerned that more and more Thai companies are racing to launch ICOs before regulation, which has also prompted the country’s regulators to speed up the development of a regulatory framework for token sales. [2018/3/4]

Among all encrypted digital currencies, the SEC only considers Bitcoin and Ethereum as not securities products. For other encrypted digital currencies, the SEC has never made a clear statement. Ethereum was designed as a utility token. The process of raising funds to support Ethereum development can be thought of as a pre-sale process for a product. Moreover, Ethereum does have instrumental properties, which are actually needed in the operation of Ethereum. So from these perspectives, Ethereum can be considered as a Utility Token rather than a Security Token. Therefore, the SEC can completely determine that Ethereum is not a security product, so it naturally does not fall within its regulatory scope.

The U.S. Securities and Exchange Commission seeks public comments on the CBOE Bitcoin ETF application: The Securities and Exchange Commission released new documents on December 28 and January 2 to publicly solicit public opinions on the CBOE Bitcoin ETF. Manipulated rule changes. The content-zce of the document will allow a total of four ETFs to be listed on the CBOE Exchange. As part of its public comment, the SEC will accept email and written information within three weeks of publication of the filing in the Federal Register. [2018/1/4]

The SEC initiated a lawsuit against Telegram in early October 2019, arguing that Telegram's token GRAM is a security, but its operation violates the securities law, so it asked the court to prohibit the issuance of GRAM in the US market and globally. The SEC won the lawsuit, the GRAMs were never issued, and the funds raised were returned to investors. The fundraising process of the Telegram project is carried out in accordance with Reg D in the United States. The operator of the project strives to complete the development of its underlying public chain within the scope of compliance, and begins to distribute GRAMs one year after investors invest in GRAM, and only after the underlying public chain goes online. But despite this, the SEC determined that GRAM's operations violated US securities laws. Now the UNI product itself is easily identified as a security product, so it is easy to be sued by the SEC.

An important consideration for whether the SEC prosecutes a project is the project's impact on the US securities market. In 2019, it chose to settle out of court with EOS. This is because the fundraising process and operations of EOS are mainly overseas in the United States, and have little impact on the US securities market. Therefore, although the EOS project itself violated the US securities laws in many aspects, the SEC still adopted an out-of-court solution.

In contrast, the SEC chose to sue Telegram. This is because Telegram has issued about 2.9 billion digital tokens. 1 billion of them were sold to 39 investors in the United States during the private placement stage. The purpose of the initial investor's purchase must be the expected profit. So the early investors actually acted as underwriters. If GRAM is allowed to be freely issued, these GRAM tokens will flood the US market because its underlying layer is based on the blockchain and there is a highly liquid digital token trading platform in the market. These security products will therefore circulate in the US market without operating in accordance with the securities laws. And this is something the SEC will never allow.

UNI has now been issued and circulated in the US market, and has been traded on a centralized trading platform. If the SEC does not take measures to prohibit the circulation of UNI, then there will be more digital tokens similar to UNI circulating in the US market. In addition, because such digital tokens are generated and flow into the market very quickly, if the SEC does not take action soon, then its supervision in this area will be difficult to be effective in the future.

The author of this article: Gu Yanxi


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