Where does the SEC’s crypto crackdown leave GameFi?
At the start of June, the SEC (known as the U.S. Securities and Exchange Commission) sued two of the biggest crypto exchanges. Both Binance and Coinbase were at the mercy of U.S. law, as there was a huge crackdown on crypto assets.
What are the SEC and crypto all about? To summarize, the SEC has come to the conclusion that crypto based assets like Solana and Ripple are labeled as ‘Securities’.
Regulating the crypto industry has become almost like a ticking time bomb for all who are involved. Some will see these recent headlines as a sigh of relief, whilst others may not be too optimistic.
What are Securities?
Securities are “a fungible, negotiable financial instrument that holds some type of monetary value”. The Howey Test is a concept within finance that helps lawmakers decide whether something is a security or not.
The following criteria have to be met for an asset to become a security:
- Money is invested.
- There is an expectation that the investor will earn a profit.
- The investment is in a common enterprise.
- Profits are generated through the efforts of others.
Which Crypto Tokens are Affected?
Some of the biggest blockchain gaming companies and crypto projects were brought up in the lawsuit, along with some gaming related tokens. Binance’s lawsuit featured the following crypto:
- Binance USD
- The Sandbox
- Axie Infinity
Coinbase’s included the above, and some extras:
- Internet Computer
- Voyager Token
In the first hour of the news breaking out, over $200 million worth of crypto was wiped from the market as investors began to sell off their tokens.
The SEC’s Crackdown goes further
It was also unearthed that the Binance CEO, Changpeng Zhao, is also going to face more charges on top of the previously mentioned. His charges involve diverting customer funds to another company that he himself owned.
As a result of all this, Binance’s assets have been frozen. This means they cannot spend any of their capital on investment related expenses, only general business ones.
The SEC will now have oversight over Binance and has also ordered them to make a new wallet for their users in the United States.
Questions and discussions have been spurred since these headlines came from the SEC. Let’s look into this.
Where does this leave Crypto Gaming?
Many have speculated that this is just the beginning of government legislation on crypto based assets. Cryptocurrencies and Web3 have entered the mainstream spotlight in the past few years, but until recently, lawmakers came together to regulate it.
Some people think this is just the beginning for crypto gaming in terms of SEC regulation. Only the bigger, well known GameFi crypto gaming tokens have been listed in these recent court hearings.
How long until the smaller tokens are brought to attention?
Crypto is described as ‘Decentralized Finance’, meaning there is no governing body such as a bank overseeing transactions and services available. Now that the SEC has latched onto the crypto space, does there need to be a new way of describing crypto?
This news has not swayed those loyal to the cause. NFTs from Coinbase have already begun to be minted. They have called it “Stand with Crypto,” and so far it has proven really popular with those fighting in crypto’s corner.
It is free to mint, however, gas fees will be incurred and donated to relevant causes. Well over one hundred thousand NFTs have been minted, and the number is still growing. The purpose of the NFT from Coinbase is to show the community wants the regulation despite the clashes with the SEC and other government bodies.
Users who have minted the NFT have taken to Twitter to show their further support by adding a shield to their profile.
You can still mint the NFT via Zora today as the NFTs are still worth it.
We hope this is not the end of crypto as we have known but instead opens up doors for legislation and mainstream adoption. Let’s see what comes of it!