American exchange Robinhood will list three cryptocurrencies starting June 27. These are polygon (MATIC), cardano (ADA) and solana (SOL). All were classified as securities (securities) by the United States Securities and Exchange Commission (SEC).
Robinhood users will have until that day at 6:59 (ET) to sell their balances in these crypto assets.according to him advertisement. If you do not, the platform will do it automatically. Until then, all operations with the cryptocurrencies involved are enabled.
Robinhood’s decision is because the SEC recently determined that these three cryptocurrencies are considered securities and that special permission is needed to offer services related to them. Others that fall into the same classification for the US government body are BNB, Binance USD (BUSD), filecoin (FIL), cosmos (ATOM), sandbox (SAND), decentraland (MANA), algorand (ALGO), axie infinity (AXS ) and coti (COTI), as reported by CriptoNoticias.
“All other cryptocurrencies you hold on Robinhood will not be affected,” the statement added. In turn, users are specified that “depending on the state in which you live, you will be able to continue operating with the rest of the available cryptocurrencies.”
Within minutes of the Robinhood announcement, ADA, SOL and MATIC did not show a strong reaction in terms of their market value. Yes indeed, the three cryptocurrencies maintain a bearish trend of more than 10% which has been going on for several days.
What is the SEC lawsuit about?
The cryptocurrency market is experiencing turbulent times due to the regulatory pressure that the SEC is exerting on platforms such as Binance and Coinbase and also against cryptocurrencies such as ADA, SOL and MATIC.
The crux of the matter is that the SEC considers that the aforementioned cryptocurrencies are securities that must be traded under license. Since Binance, Coinbase, and Robinhood do not have such permission, they cannot offer such a service to their users. This is also why more exchanges could face the same problem in the short term.
Without going any further, Binance US (a subsidiary of Binance in the United States) delisted more than 100 cryptocurrency trading pairs after learning of the SEC’s position. The regulatory body considers that these cryptocurrencies are securities and should be regulated as such.
A similar situation was experienced with Ripple (XRP) at the end of 2020. At the time, a dozen exchanges dropped support for the cryptocurrency, which the SEC had also listed as an unregistered security.
What is a security title?
A security (security) is a financial instrument that represents a property right over an asset. By purchasing a security, the investor is obtaining a financial claim on future cash flows that will be generated by that asset. An example of a security is company shares. For the SEC, many cryptocurrencies can be classified as such.
In the USA., the definition of a value is based on the Howey’s testwhich comes from a 1946 Supreme Court case. Under this test, a transaction is considered a security if there is an investment of money, there is an expectation of profit, the investment of money is in a common enterprise, and any profit comes from the effort of a promoter or third party.
Thus, if a cryptocurrency is issued in the context of an initial coin offering (ICO), in which investors contribute money with the expectation that the actions of the developers or promoters of the cryptocurrency generate profit, such cryptocurrency is likely to be considered a security and therefore subject to SEC regulations.