In another series of the saga between the Telegram Open Network (TON) as the issuer of Gram (GRM) tokens and the United States Securities and Exchange Commission (SEC), we can see that no one is losing on their opinion. In fact, the crypto news today show that SEC insists that Grams are securities in an official response to the network’s counterclaim.
Following the counterclaim by Telegram on October 16 where the company argued that its native cryptocurrency is not a security and that the preliminary injunction should be denied, the SEC insists that Grams are securities in a new filing in the US District Court for the Southern District of New York on October 17.
In the document, the regulator not only insists that Telegram violated the US securities laws – they also argue that a preliminary injunction should be granted to prevent Telegram from further violation. It also stressed that the company is likely to violate the law again.
The SEC outlined that Telegram’s proposal and attempt to deny the injunction will allow them to continue engaging in violative conduct after five months. This will put the burden on the regulator to seek another restraining order (TRO) from the court. As SEC insists, it is an extraordinary non-justified request that would constitute a waste of judicial and public resources and should be denied.
According to the TRO filed on October 11, Telegram should represent itself in court in a new hearing scheduled for October 24. Right now, the SEC reiterated that Telegram has violated the securities laws by selling Grams which are “securities” under the Securities Act (to certain investors such as US buyers) without any exemption from registration.
SEC insists that Grams are a currency or commodity after the launch of the Telegram Open Network (TON), arguing:
“Defendants’ Opposition to this showing rests entirely on the conclusory allegation that ‘Grams will merely be a currency or commodity’ and therefore not a security ‘once the TON Blockchain launches.’ […] whatever Grams were in 2018 or what they will be whenever Defendants decide to distribute them, Telegram’s mere assertion that Grams ‘will … be’ a ‘currency’ does nothing to cure the prior violation of law.”
Previously, we published multiple reports on Telegram’s case showing key events and issues around TON as a network and the expected Gram (GRM) tokens.
WEF2020 Announces Global Consortium For Regulating Bitcoin
“Governance is the core pillar of any form of digital currency. It is critical that any framework on digital currencies ensures security, efficiency, and legitimacy of payments while ensuring fair and open competition. We welcome the WEF’s platform to help develop a robust governance framework for inclusion through digital currencies.”As per the recent reports, the efforts of creating a regulatory framework on cryptocurrencies are getting more serious. As of this month, the European Union introduced an updated version of the 5th anti-money laundering directive and had increased regulatory focus. All of the crypto-related businesses are operating from Europe and they have to follow the rules which include a more in-depth know your customer process, filling suspicious activity reports and conduct transaction monitoring with law enforcement. After the WEF2020, the world watchdogs will try to establish a framework of regulations for crypto so it will be extremely interesting to see whether this will be beneficial for the market.
Germany Increases Costs For (Some) Crypto Firms By $250k
"They have to now set up a new legal entity since January 1 has passed," explains Philipp Sandner, who is a professor at the Frankfurt School Blockchain Center. "But this new legal entity would be illegal for custody, trading and issuing."The new laws show that Germany increases costs and that all companies founded after January 1 will need a BaFin license to offer these services. Meanwhile, the companies founded before January 1, 2020 will benefit from 'grandfathering' until November 2020.The cost of acquiring a BaFin license could be prohibitive for new startups, both Sandner and one lawyer explained.
"For companies (be it startups or larger companies such as banks), the license induces costs of approx. USD 250,000," they say. "Not every startup will be able to bear these costs. The small startups might be driven out of the market; the larger ones and the incumbents will probably apply for the license."As Germany increases costs for crypto firms, many wonder why is this the case. The truth is, the government is sought to introduce a law which might end up driving startups "out of the market" as experts noted.Both experts noted that the government had the opposite intention in mind and wants to encourage mainstream adoption of cryptocurrency and blockchain technology, rather than leaving these sectors open for unregulated firms. However, the costs at this point are big for many crypto firms which is why the crypto climate in Germany is not that good.Meanwhile, the latest Bitcoin price news show that the cryptocurrency has fallen by 6% due to the situation in China.
SEC Went Head To Head With Telegram, Reviewing TON Again
- Whether or not an investment contract is being offered in a securities transaction
- Whether an investment contract is a commodity which can be sold in a traditional commercial transaction
“If a developer team retains certain assets and sells it to investors, it falls into the definition of security. I think that the U.S. legislation must be shaped to take into regard emerging technologies and new business models that hadn’t been present not only in the days of SEC creation but also during the judicial battles on security definitions.”The crypto industry has been witnessing an enormous amount of interest around stablecoins, a digital offering which presents users with all of the various advantages of cryptocurrencies all while having their values pegged to a stable fiat asset such as the US dollar, the Euro and others.
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