The United States Securities and Exchange Commission has okayed the move by a social media platform to launch its stablecoin without the much-enforced registration as securities.
In a letter issued on November 19, the SEC notes no planned sanction against IMVU, a platform based on the avatar platform for launching its VCOIN under some specific conditions. Furthermore, the regulatory body has given the platform the go-ahead to offer the token without undergoing the much-needed registration and licensing. In recent days, the SEC has warned crypto firms that want to issue their tokens to ensure that they follow its regulatory policy, which firms have branded contentious.
United States SEC gives conditions that the platform should obey
The United States Securities and Exchanges Commission classifies securities as assets depending on the work done by a third party to profit from it. To ensure that they do not go against the SEC and risk sanctions, IMVU needs its tokens just the way they are and not look like something that can generate profit.
A typical example of a project that was sanctioned in this regard is the Facebook Libra project. As part of the agreement between the SEC and IMVU, the platform still has to follow the mandatory Know Your Customer and Anti Money Laundering rules.
Furthermore, the SEC has told IMVU that they must be a specified limit on the number of tokens purchased, converted, and transferred between parties. The SEC has also notified the platform that the coin must sell at a fixed price of $0.004 and should not be listed or promoted on any third party exchange website. Lastly, the firm will not use the proceeds from the tokens to upgrade the network without selling them.
IMVU has about 7 million players on its platform that are ready to use the token
In what appears to be the first time, the SEC also said that it would not pursue any sanction against IMVU provided the tokens are used for the purpose that they were created for. In its statement, IMVU revealed that users on the social media platform would earn free VCOIN, buy, and convert it into cash.
This letter shows what the commission’s staff think about enforcement, not a legal determination. Going by recent events, the SEC has issued the no-action letter on just two occasions, with the first one coming in 2019 after an aircraft company, Turnkey Jet, announced that it would begin selling its TKJ tokens.
The second time the SEC granted the no enforcement letter was when an 8th grader said she wanted to release a token for her game, Pocketful of Quarters. Both tokens were approved instantly because they would not be exchanged into cash after users buy them.
In a statement by the Chief Strategy Officer of IMVU, John Burris, he said that the letter was a good one as it means that ERC-20 tokens are gaining favors in the eye of the SEC. While the previously approved tokens were not being used in the outside world, IMVU boasts about 7 million players ready to use the tokens.