Bitcoin Forum

Source: https://decrypt.co/35532/sec-killed-icos-defi-could-be-next

Whenever there are new innovative ways of profiting from the internet (especially cryptocurrencies and blockchain technology), SEC is always there to slowly control them for good. Like in ICOs, the US SEC has restricted its citizens from participating in those token sales (except if it's whitelisted by the US SEC or US-based accredited investors are allowed, etc.).

Now that DeFi projects are on a roll, it looks like the SEC is trying to stand on their way again. What are your thoughts or opinions about this one guys?

The Abra case was very specific -- they offered markets for tokenized securities and foreign currencies, did not register this activity with the SEC or CFTC, and did nothing to stop customers in the US from investing. They did this in a completely centralized way too, so there could be no hiding behind decentralized protocols. In other words, the regulators went after the lowest hanging fruit they could find.

To some extent, I'm sure regulators are watching De-Fi projects. It's inevitable given the amount of money flowing into them. It's not just the SEC or CFTC either. They pursued the Abra case because of the products being offered. Other De-Fi projects cover money transmission (FinCEN), lending (FTC)...

The degree of decentralization will be a key factor. The SEC chairman confirmed last year that Ether was not a security despite its ICO beginnings. That suggests there is some wiggle room for companies that launch De-Fi protocols that become increasingly decentralized over time -- perhaps in line with Hester Peirce's safe harbor proposal (https://www.coindesk.com/sec-commissioner-hester-peirce-proposes-3-year-safe-harbor-period-for-crypto-token-sales).

Well you can't really expect all kinds of projects in the crypto industry to run some kind of anonymity once they reach the shores of US. Since the US SEC is always strict about their regulations as well as the strict implementation of KYC and AML procedures. All of this is to be expected to all kinds of crypto projects regardless if they are new or not since if we are talking about tradeable securities and assets we can always expect for SEC to be sniffing around it.

I strongly believe that projects that launch ICOs or IEOs are central projects and those who manage them must submit to more regulatory restrictions and are not an example of decentralization.
99% of them aim to make the people who run it rich and have no plans to continue for the long term.
Real projects do not need financing or ICO launches, and it is also a stupid way to achieve sufficient funds to sustain projects.

That's what I meant, maybe developers might need to invent smarter solutions.

I had to agree with you about that mate. The US SEC is so tough on the crypto industry nowadays, especially restricting US citizens from participating in ICOs, IEOs and other forms of token sales (unless Brock Pierce wins the next election lol). I just wonder how would they crackdown DeFi in the next few years or so.

And speaking of trading securities though, yes we need to have an appropriate license from the US SEC even if we are an international company. In the Philippines, they categorized cryptocurrencies as securities. If starting a company by conducting an ICO in the Philippines, the company has to register for a license in the SEC.

There will always be innovative, new and out-of-the-box ways in the financial side, but SEC would always be there to sneak on us without warning.

in truth they haven't been that heavy handed. as of this past february, the SEC had only filed charges against 27 ICOs since 2016. by comparison, there have been ~6000 ICOs in total across the industry. https://www.coindesk.com/now-more-than-ever-serc-is-scrutinizing-unregistered-token-offerings

several (if not most) of those cases involved severe defrauding of investors---not just run of the mill ICOs where they shouldn't have allowed americans to participate in the offering.

also, it was only a few months ago that hester peirce proposed the 3 year safe harbor provision for ICOs. that would give companies 3 years to adequately decentralize their platforms or establish their tokens as utility tokens before facing any adverse action from the SEC. maybe the SEC will adopt her proposal.

I'm sure that if they found out that those DeFi are in violation of ther policies, for sure that they are going to be the next target, and maybe on their crosshair already. Maybe one day we will here DeFi's being sued by them, just like what they did on some IEO's and ICO's. Big money is flowing on DeFI's millions if not billions already and this is enough for SEC to take a closer look in the future.

What's wrong on defi? I think ICOs that generate funds are more prone to sec warning, but I dont see any way they could find reason to sue defi projects, they are not running any form of crowdfunding ( new defi's) on centralized platform and mostly uses dex which are decentralized.

Cause some projects are came from ICO without any affiliation to defi, then suddenly becomes a defi type of blockchain which is very suspicious. Those projects can be targeted but not all defi hosted an ICO that have some sort of violations.

This is the problem with SEC. They thought everything is under their control. One day they will be the reason why the market for crypto will crash. Because of their tight grip on it.

What would you expect? They would really like to be ahead on everything or being on top which making up decisions on which they do saw that it might be a threat or something.

but i do fully disagree that crypto market will crash because of that.We can say that they would make a big impact on making up those decisions but doesnt meant

that this market will collapse just because of that.

I also don't agree that because of SEC crypto market will crash. Look at where we are now today, with or without SEC, crypto industry survives and keep on progressing. So the SEC issue will always be there, they will only find ways how to manage crypto projects because there's no stopping for these projects to conquer in the world market.

I agree. During the early days of bitcoin, there's no SEC that's voicing their thoughts about what bitcoin was and yet bitcoin has been surging and became stabilized through those years and the adoption rate has increased.

The good side of having SEC is that they're chasing those scams and they've punished people who have been proved to be part of a scam in the past. And that's where they should be focusing, tracking down the scams and their leaders.

Now they are truly a hypocrite. There are news about bitcoin considered a form of money. In their own jurisdiction it was mentioned, now Im not sure how SEC will contradict that one. See bitcoin price now? It really rise, and Im sure its because of that.

They should only focus on that one. Not criticize and persecute those legit and developing projects on defi. I know this is a hype but they are pushing their boundaries too much. If ever they occur to do this, then you can described their attitude as not professional.

Maybe you are forgetting the dozens of Bitcoin ETF proposals that the SEC denied for about 2 years now denying the chance for Bitcoin ETFs be possible in the fiancial market, the most recent ones they denied are from Wilshire Phoenix, Bitwise, and Arca which all of them have their proposals denied several times already. Aside from Bitcoin ETFs being denied the SEC also showed its power when they shutdown the sale of Telegrams's cryptocurrency, GRAMs, as they have proven it to be a security token rather than a utility one. These projects and offerings have been monitored by SEC since on their eyes they have violated or have not meet the requirements they need to have to be made available to the public. These are just some of the examples to show how powerful is the SEC in the US and how they can stop crypto projects on dominating the market.

They are the government and they can do whatever they want and as for us, we just follow them. And if a DeFi comes and on their side it's not an acceptable project base from their basis and standards, they have all the means to do whatever they can through the reach of their authority.

I hope that they wouldn't go that much but as long as they're determining the projects and we understand what they're fighting for, we can count on them. We need them to chase those scam projects.

defi is decentralize and teams are unknown. i don't think they can actually find these defi teams. their code is pretty solid since its just seed funding. in the defi protocol as far as i know its like staking your assets. i'm not sure how SEC could interfere to these projects since its governed by the protocols not by the team.



i don't know if the dex can allow SEC to go dig them. its wild goose chase.

What are you talking about here? If you look at Aave's website you will see in their about page (https://aave.com/about) the names of their high ranking employees working for them from their CEO, COO until their Software Engineers. Even if they are a decentralized finance company it doesn't mean that their team should be anonymous too since if they are they will just be making their operations illegal as they won't have the right to become a legally operating company. The issue really here is if SEC will be bothered by the fact that people can give and receive loans without some kind of authority within them which as of right now is something that can be alarming to them ones it will become popular.

If SEC has to go dig them and there's someone that they can go after, I guess they will.

But IIRC, they are also aware about dexes as there's no central authority that manages it. So, if they are to go after with dexes, what would be their main agenda? as long as it's not on their watchlist, I guess there's nothing to worry about but if they have included it on that list, we will see how they will act on it.

That is fine as long as they following up the standard and not go bias on any project they targeted. I know they have the power but we must remember that its government and its bound by political matter, whereas the agenda could be bought under the table.

I think corruption could influence some of the members inside if some projects offered them money to turn down other projects. Just a theoretical idea but its not impossible to happen.

That's part of what we can think as we are aware of corruption in the government. There could be under the table transactions if a project has been caught on their spot and they are being targetted.

Let's hope for the best for SEC and will make their job truthful and honest. It's good that they are eyeing for crypto and even touching DeFi's as it's helping the newbies and tells which projects they should avoid and which projects have a go-signal from them.

Maybe the keyword here is "swap contracts", if SEC deems that most Defi are operating under the pretense, then they are going to stop it just like what they did against Abra. What is Defi's poster boy right now? It's MakerDao, in which the model are very similar or mirrors share buybacks. They may have camouflage it as through auctions and burn tokens. But if SEC finds a slight evidence that this is swap contracts then I expect the unexpected for the Defi hype. Of course, it's their job, this is not about control. But I don't think that they are the reason that crypto market will crash, that's an exaggeration.

Sooner or later they will find loopholes on defi but I am just expecting them to do good than harm. Most ICO projects before got condemned so much for their flaws and illegal or lack of paper shit but thats cant be found on defi projects cause technically they are all working via smart contract which government will find it hard to do an expose. We are not sure, maybe in time they will strictly imposed a drop dead law for cryptocurrency and could cause market crash. Only bitcoin in the cryptomarket following the decentralized term the rest are all centralized so its not impossible to happen.

Actually there are a lot of contradictions on the SEC policies so expect them to turn their eyes on these Defi projects, they are giving banks a run for their money and SEC don't want this, SEC is here and exist to protect the interest of traditional financial institutions like banking so expect it now that DeFi is now in a billion dollar capitalization.

There were tons of abusive practices from icos and this will attract the same crowd and worse. By the time this hype is dead and gone legal types will have a lengthy shopping list of people who deserve their attention.

I can also believe there are still operators involved who don't think any laws apply to them ' because it's on the Internet.'

Right, the same type of people who believed in every hype like in the ICO madness, and probably these people are the same behind these DeFi again and willing to take the risk just to make money regardless if SEC are going to stick their nose again on the latest "money making machine" that is DeFi. Just a matter of time before legal woes will enter the picture in DeFi projects.

It is a vast majority in the cryptocurrency space that think that the law does not apply to them and the scammers are a part of that idology that they could get away with anything as there is no strict law monitoring their business of raising money and get away with it. The DeFi market is getting the same hype the ICO market garnered and majority of the project will die eventually.

That "it is on the internet" thing has hurt a lot of people and scammers do not know that properly. Just because you created an ICO that was basically just some codes, doesn't mean that nobody can touch you, if you live in the same nation as someone who has invested into your ICO, they have the power to figure out who you are and put you into jail if you really did something like scamming them and taking money to never look back, they even have a very easy time to jail you just because you did something probably illegal while doing ICO as well with the economical laws of that nation.

So, if DeFi people want to just copy that and scam people, they will soon realize that things do not work that way and they will lose a ton of money but also might get punished with jail time.

i am not confidence when there are severl project booming, SEC will review some project to give proof is it againts their rule or not. its seem very unfair for investors that coming from outsid USA. to be save better to avoid project that accept USA citizen although developers team request kyc.

These projects that fund the devs honestly should not be funded they scam so much money from people.
We used to hate premines now coins have the devs have all the coins for them selves then sell them and keep like 20% 40% on top of a ICO that sells 60%
Its crazy people just throw there money into it even these defi projects its so easy for the devs to fund the UNiswap all on there own make fake trades like people are buying it.
And then boom take all the funds out after some real people buy some coins happening so much