The US Securities and Exchange Commission (SEC) issued a rare letter without action at the request of a blockchain-powered platform for issuing a digital asset.
The SEC’s letter published on November 19 states this The Corporate Finance department would “recommend no enforcement action” against the social avatar platform IMVU for issuing its digital VCOIN assets under certain conditions. The commission enables the company to offer the token without registering it as collateral.
Cryptocurrency companies that issue their tokens often have to adhere to the SEC’s legal framework it has proven controversial. The “value” rating applies to assets whose profit depends on the work of a third party. In order to comply with the letter without taking action, IMVU must avoid its new stablecoin looking like an investment opportunity that Facebook, for example, came across with its Libra stablecoin.
As part of the provisions of the letter of recommendation to employees The SEC said IMVU would continue to be subject to “Know Your Customer” and “Anti-Money Laundering” regulations in addition to “set limits” on VCOIN purchases, conversions, and transfers. The letter states that IMVU must “continuously make the token available in unlimited quantities and at a fixed price” of $ 0.004 and not “promote or support” the listing or trading of the token on any third-party platform. Additionally, the company would not be able to use the proceeds from the sale of its VCOINs to improve its network until the tokens are available.
In what appeared to be the first time The regulator stated that it would not recommend any enforcement action against IMVUs to make their VCOINs available for their “intended purpose”. Depending on the platform, users can buy, earn, and transfer the tokens outside of IMVU to convert into fiat.
The letter expresses the opinion of the Commission staff on the application of the law and is not a legal decision. However, such action letters have only been issued twice to cryptocurrency companies. In April 2019, the SEC confirmed that it would not recommend any enforcement action against the airline. Turnkey jet when selling your TKJ tokens.
A few months later, The SEC issued a similar letter to an eighth grader who wanted to issue tokens for his crypto gaming company Pocketful of Quarters. However, both tokens have been approved on the grounds that they are much more isolated than VCOIN as they do not allow the tokens to be converted back into fiat.
“This no-action letter is significant because unlike the other two, it is the first time an ERC-20 token has been blessed by the SEC. They say ‘Hey, get it off the platform'”, John Burris, IMVU’s chief strategy officer, told Cointelegraph. “It will allow you to go out into nature, so to speak.”
While Pocketful of Quarters and Turnkey Jet had very limited use cases, IMVU is already an established platform with virtual transactions used by approximately 7 million players per month. Burris suggested that the SEC’s decision was based on creating a “real test case” for the broader cryptocurrency and blockchain space:
“Our users are already very satisfied with the case of buying a digital currency with cash and then spending them together on the platform. We are very confident that they will be introduced.”
Since the SEC letter states that VCOIN tokens cannot be transferred to third party platforms, IMVU users can send them from the virtual world to a private wallet for a transaction fee of 10%, where the company states they will buy them back as requested. VCOIN is definitely not Bitcoin (BTC), it is sold at a fixed price and the supply of tokens can be increased later.
IMVU plans to sell the token in its virtual world from January.