What does VCOIN’s SEC authorization mean for securities law and crypto?



As Cointelegraph reported two weeks ago, the Securities and Exchange Commission put out a rare no-action letter in defense of IMVU’s new blockchain-based VCOIN.

VCOIN is only the third digital token to get such legal protection from the U.S. securities regulator, which makes it an exciting development. The SEC has been extremely active in punishing initial coin offerings that it views as unregistered securities offerings, but it has been more reluctant to define what does not count as a security — a problem that Commissioner Hester Peirce noted just last night. A no-action letter is, however, not the same as a rule from the SEC or a statute from Congress.

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The protection a no-action letter provides applies only to that particular case. They could also go away as soon as, say, VCOIN deviates from the standards set out in the letter. And, it is definitely a narrow lane that VCOIN has in front of it.

Michelle Gitlitz, who leads Crowell & Moring’s blockchain and digital asset practice, explained to Cointelegraph:

“I think VCOIN is a little bit different than your normal token offering, because VCOIN’s proceeds weren’t going to be used to finance any upgrades to the network and the network was fully developed. I think that’s a key distinction with VCOIN compared to some of the other products.”

The issue of using funds from token sales to build a network that was not yet complete was central to the SEC’s shutdown of Telegram’s planned network.