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US SEC Approves Social Media Platform IMVU to Issue Stablecoin Without Registering as a Securities

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The no-action letter states that the regulator recommends “no enforcement action against platforms that issue digital currencies convertible into fiat currencies.”

Original author: TURNER WRIGHT

Original source: Cointelegraph Chinese

Compilation: Zion

Editor in charge: Rose

The U.S. Securities and Exchange Commission (SEC) issued a rare no-action letter in response to a blockchain-based platform issuing digital assets requirements.

In a letter dated Nov. 19, the SEC said its corporate finance division recommended "no enforcement action against social platform IMVU" and allowed it to Issue VCOIN digital assets under certain conditions. The SEC will allow companies to issue tokens without registering them as securities.

Cryptocurrency companies that issue their own tokens often must comply with the SEC's regulatory framework, which has proven controversial. The classification of "securities" refers to assets that rely on the work of third parties for profit. In order to comply with the no-action letter, IMVU needs to prevent its new stablecoin from looking like an investment opportunity, as Facebook erred with its Libra stablecoin, for example.

As part of the terms of the staff reference letter, the SEC stated that IMVU has "certain restrictions" on the purchase, conversion and transfer of VCOIN , will still be subject to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. The no-action letter states that IMVU will need to make the tokens “available continuously in unlimited quantities at a fixed price of $0.004” and must not “promote or support the listing or trading of the tokens” on any third-party platform. Additionally, the company cannot use VCOIN sales proceeds to upgrade its network until the tokens are available.

Apparently, however, the regulator said it recommended no enforcement action against IMVU so that VCOIN could achieve its "intended purpose." According to the platform, users can buy, earn and transfer tokens from IMVU and exchange them for fiat.

This no-action letter expresses the opinion of SEC staff regarding enforcement, not a legal decision. However, such no-action letters have only been issued twice for cryptocurrency companies. In April 2019, the SEC confirmed that it would not recommend enforcement action against the sale of TKJ tokens by aircraft company Turnkey Jet.

A few months later, the SEC issued a similar no-action letter to an eighth grader who wanted to issue a token for his crypto game company Pocketful of Quarters. currency. However, both of these tokens are more conservative than VCOINs and are therefore approved as they do not allow tokens to be exchanged for fiat.

IMVU Chief Strategy Officer John Burris told Cointelegraph: “Unlike the other two no-action letters, this one is significant because it is the first time the SEC has By approving an ERC-20 token, it’s saying ‘hey, get it off the platform.’ It’s going to be allowed in, so to speak.”

While Pocketful of Quarters and Turnkey Jet have very limited use cases, IMVU is already a mature platform with approximately 7 million monthly players using virtual transactions. According to Burris, the SEC's decision was based on building a "real proof case" for the broader cryptocurrency and blockchain space:

"Our users have already Very used to buying digital currencies with cash and then spending each other on the platform. We are very confident in adoption.”

Since the SEC's inaction letter stated that VCOIN tokens cannot be transferred to third-party platforms, IMVU users only need to pay a 10% transaction fee to transfer tokens from the virtual world to a private wallet. IMVU said it will buy back the tokens upon request. VCOIN is definitely not Bitcoin, it will be sold at a fixed price and the token supply can be increased later.

IMVU plans to start selling tokens in a virtual environment starting next January.