[Interpretation] “Fortune”: What makes the SEC’s major digital currency decision


nnnThe SEC’s decision to DAO on Tuesday has already aroused great repercussions in the ICO market because the ruling says that some of the tokens are securities that need to be regulated by the SEC, which could mean a cooling of the ICO market. Experts have different views on the move, but in general, people think that the SEC needs to give more clear guidance, so that the industry understand what kind of token is a securities. But in any case, one thing can be clear is that the long-term development of the block chain technology and not much impact.n
nnTranslated by: Inan
nThe Securities and Exchange Commission (SEC) on Tuesday announced that some of the “token” used for sales is actually securities, subject to its supervision, this move will shake the fiery ICO market.n
nIn view of the recent upsurge of ICO – dozens of small companies in this way from ordinary investors to raise millions or even hundreds of millions of dollars, SEC this has a significant impact.n
nIn order to understand the meaning of the decision and the reaction so far, we now have a simple explanation.n
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nWhat exactly is ICO?n
nICO operates in the same way as an IPO, which is a way for the company to raise money from the public. A typical ICO can last several hours to several weeks, and the company that initiates the event will invite people to buy tokens (also known as digital money) to fund a project.n
nThese projects involve block-chain software (such as the Ether Square) – run on multiple computers to create a tamper-proof digital book. This software can also perform other functions, such as creating a so-called smart contract or investing.n
nProject sponsors should send digital currency such as Bitcoin (in some cases, credit card) to the company’s website, and then receive digital tokens in return for ICO in this way.n
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nWhat are these “tokens”?n
nThe token gives the holder the right to participate in a block chain activity. For example, a company may ask people to have tokens to participate in automated investment projects or access to cloud computing services.n
nBut the token can also be traded on the secondary market. Just as college students can sell their own tokens on the subway, the owner of the digital tokens can redeem cash or bit currency on a particular website.n
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nWhy does the SEC interfere?n
nICO skeptics have long warned that, in many cases, these tokens are only a new form of shares, and no license to sell their own token will violate federal securities laws. The SEC confirmed this claim in the ruling this week, saying that the token in the ICO did belong to securities.n
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nWhat is the ruling?n
nThe ruling came from a SEC survey of a German company that had set up a group called DAO (deutsche autonomous organization), and DAO raised $ 150 million in last year’s ICO.n
nDAO invites people to buy tokens for seeking an automated investment strategy and to make the token owner “reward”. Christopher Jentzsch is a leader of its ICO, and he even compared the process to a bonus. So the SEC that DAO case of token is a securities is also reasonable.n
nAlthough the SEC’s conclusion is only for DAO, its decision does provide some additional guidance to the ICO and indicates whether the token is securities depends on the specific “facts and circumstances” of each case. The SEC also seems to acknowledge that the ICO issue can be retained:n
nThis report reaffirms the basic principles of US federal securities law and describes its new paradigm (virtual organization or financing entity) for the use of distributed books or block chain technologies to facilitate financing and / or investment and related securities issuance and sale applicability. Automation of certain functions implemented through this technology (“smart contract” or computer code) does not depart from the management of US federal securities laws.n
nFinally, the agency also said it would not take enforcement action against JOnst or other DAO ICO organizers. Although there is no reason to explain, but probably because the ICO has just appeared, SEC does not want to look too harsh.n
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nHow does the market react?n
nMany ICOs are using ethertop tokens, and their prices fell 10 percent on July 25. However, it is not clear how much this relationship with the SEC’s ruling, or just the currency itself, the normal fluctuations. We do not know whether the ruling will cool the entire ICO market, or will only make the company to limit the sale of coins outside the United States.n
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nHow do experts view it?n
nSome people think that the SEC’s ruling is only against DAO, others warned that this is only the beginning of sanctions ICO.n
nBitcoar tycoon Barry Silbert announced that the ruling would eventually slow the market, and that it would lead to more serious consequences, ICO may be criminalized as a criminal act.n
nLawyer Brian Klein told The New York Times: “The SEC has come – this is ominous for many of the recent ICOs.”n
nDigital money company Ripple CEO Brad Garlinghouse said:n
nn”Anybody who is surprised by the SEC investigates ICO is either not concerned or being driven by greed to forget how the financial industry is working.” It’s like an IPO. If a thing walks like a duck and sounds like a duck, then it’s A duck. “n
nnDigital currency advocacy company Coin Center stressed that the SEC’s decision is for DAO, the other token will not be affected:n
nn”We believe that substituting other tokens into the same facts and circumstances will find that some of the tokens do not conform to the definition of the securities, especially the tokens with potential utility and not just speculative investment value.”n
nnAlfredo Silva, a securities lawyer at Morrison u0026 Foerster, said the SEC’s decision to DAO was not surprising, but he added that the agency had to make it clear that its conclusions had a different effect on other types of ICO tokens applicability:n
nn”It is not clear whether the so-called app token or other types of tokens are not considered securities. Ideally, the SEC will follow up on the announcement, provide no objection or other guidance, And the large block chain community to understand where the token is part of the securities. “n
nnThe Alphaville blog of the Financial Times also wrote to SEC officials that its fictional “Alphachain” tokens should be exempted from the agency’s regulation.n
nn”We are sure that we can prove that we should not be regulated because the paperwork is hard and we do not want to do this.We do not want to tell anyone what we want to do with their money.n
nnIn addition, we made it clear in the presentation that we wanted to develop our “vision of the future, that is, Alphaville journalists can retire early and enjoy life on the beach comfortably.”n
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nThe current situation?n
nSome experts believe that DAO’s decision is only a beginning. In the next few weeks or months, the SEC may publish more detailed guidelines, as well as enforcement procedures for recent unreliable ICOs. The agency also issued a notice warning investors to be careful to decide whether to participate in these investments.n
nBut in the long run, SEC’s ruling is unlikely to affect the greater development of block-chain technology, and many expect the technology to become the most subversive software innovation in the next few decades.n

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