Gu Yanxi: What factors will affect the SEC to take regulatory measures?

I believed in a previous article that the current DeFi governance tokens are essentially securities (see my article "The essence of DeFi governance tokens is securities"). However, the operation of these tokens does not operate in accordance with the securities laws of the United States. Therefore, these projects have a very high risk of compliance and are likely to be regulated by the SEC.

However, since Compound first started issuing governance tokens in mid-July this year, more and more DeFi projects have begun to issue their own governance tokens due to the market enthusiasm caused by the tokens.

So why doesn't the SEC take regulatory action now to deal with these violations?

In fact, whether the SEC takes regulatory measures is based on various considerations. Whether a project violates securities laws is only one element in whether the SEC takes regulatory action. But at the same time, there are other factors that affect whether the SEC will take regulatory measures against a project that violates the regulations.

Gu Yanxi: The new high of Bitcoin has become the tipping point for the development of encrypted digital finance, and this growth is more stable: On December 17, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that the price of Bitcoin reached 2 million U.S. dollars, making it a record high since its launch in January 2009. This record high of Bitcoin is not only a record high in the trading price of an encrypted digital asset, but also indicates that the development of encrypted digital finance has reached the tipping point. Encrypted digital finance will develop in an accelerated manner and will bring fundamental changes to the existing financial market. He pointed out that the most direct factor leading to new highs in Bitcoin prices is the supply and demand relationship of Bitcoin transactions. Subordinate factors are factors directly related to Bitcoin transactions. In addition, the increase in bitcoin holdings by various mainstream financial institutions is also a further recognition of bitcoin. All of the above factors have made the market expect that a large amount of funds will flow into the Bitcoin trading market, thus pushing Bitcoin to a record high. Gu Yanxi said that the rapid growth of bitcoin prices this time is fundamentally different from the growth in 2017. Factors leading to this growth include a more friendly regulatory environment, a more solid market infrastructure and the entry of institutional investors, while the growth in 2017 was mainly the result of speculation in the market by retail users. So this time the growth has a more solid foundation. Although the price trend of Bitcoin will still fluctuate greatly in the future, its growth trend is certain. [2020/12/17 15:29:51]

First, the SEC is a US government department. Government departments have their own budgets and plans every year.

Gu Yanxi: European finance ministers may consider cooperating with technology companies to formulate Libra response strategies: On September 14, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that European finance ministers should perhaps change their Consider the strategy to deal with Libra from the angle of view. He said that European finance ministers should adjust their strategies to allow digital stablecoins like Libra to operate within a controllable range. In this way, we can have a more accurate understanding of the impact of digital stablecoins on the currency market, and it will also help us develop a Euro CBC that can better meet market demand. Judging from the trends brought about by the development of technology applications, technology companies have more advantages than commercial banks in implementing the central bank's monetary policy in some respects. Therefore, European finance ministers should perhaps consider how to better cooperate with technology companies, rather than rejecting them as the opposite. [2020/9/14]

It has already made a work plan for the next year before the beginning of the year. Then it will basically execute according to this work plan. The same is true of the way the SEC works. It will also formulate a work plan for the year at the beginning of each year, including the cases planned to be prosecuted, and then proceed step by step according to the work plan.

Gu Yanxi: Bank of America's custody of encrypted digital currency can help the market achieve more growth: On August 7, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published an article "The Significance of Bank of America's Beginning to Manage Encrypted Digital Currency" , U.S. regulation began to allow U.S. banks to host encrypted digital currencies, which has a far-reaching impact on the encrypted digital currency and encrypted digital asset industry. The main impacts are as follows: 1. There are more choices for the encrypted digital currency custody business; 2. The encrypted digital currency market realizes more increments; 3. The market providing encrypted digital currency custody services will change; 4. The encrypted digital currency in the United States The asset market infrastructure has been further strengthened; 5. Custody business is the beginning of the US banking industry's entry into the digital financial business. [2020/8/8]

Of course, this work plan must also leave enough room to deal with emergencies that are not within the scope of the planned work. For example, if there is an obvious violation in the market that has a great impact on the US securities market, then the SEC is likely to take timely regulatory measures. But in most cases, the SEC will decide when to initiate litigation against which project according to its own work schedule.

A key factor in deciding whether to prosecute is the size of a project's impact on the U.S. securities markets.

The responsibility of the SEC is to ensure the safe operation of the US securities market. If a project operates mostly outside the U.S. market, the SEC will place it in a low-priority position in dealing with it even though it violates U.S. securities laws.

One of the best illustrations of this is the measures taken against EOS. Another case is the processing of Telegram. Telegram plans to launch its system and issue its tokens by the end of October 2019. The SEC filed a lawsuit against Telegram earlier that month, accusing it of operating in violation of U.S. securities laws. That’s because the SEC knows full well that if the SEC doesn’t block Telegram’s token offering, those tokens will flood the U.S. market. Therefore, the SEC must initiate regulatory measures in a timely manner to prevent such illegal projects from proceeding.

One factor affecting whether the SEC takes regulatory action is the ease with which a project can be processed.

If a project is small in scale and has very obvious violations, and the regulatory measures taken by the SEC can be quickly ended, then the SEC is likely to take timely regulatory measures. While punishing this project, it also serves as a warning to other similar projects in the market.

The start and timing of the SEC's work year may also affect whether the SEC takes regulatory action. Its working year ends in September. It chose to settle with EOS out of court in September 2019. This is considered by the market to be the SEC’s plan to end its work this year and deal with the EOS case as soon as possible.

The above are several factors that affect whether the SEC directly takes regulatory measures.

The SEC has always been very clear about the basic views of blockchain-based innovations. If a token is a security token, it must operate in accordance with existing US securities laws. The SEC has repeatedly reiterated its basic view on this issue. If some innovative projects ignore the views of the SEC and design the tokens in their projects as a substantial security product, but do not operate in accordance with the requirements of the securities law, then the chances of such projects being supervised by the SEC are very high .

Even if the SEC does not take immediate action in the near future, it cannot be assumed that the SEC will not take action in the next few years. In fact, let's take a look at some of the regulatory measures that the SEC is taking now, which are actually aimed at projects that started a year or two ago. Regulatory lag is also reflected in the handling of illegal projects.

Tags：

XLM