Hi,
Regarding development of Cardano echosystem, one major point, is the SEC actions in the US are creating fear across the ecosystem, that most likely prevents actors from developing projects using crypto in general, and Cardano in particular.
It is worth noting that when the SEC mentioned Cardano in the lawsuits it filed against Coinbase and Binance, ADA lost a significant amount of its value.
Charles Hoskinson and Cardano foundation responded that ADA is not and has never been a security as per US law, but this declaration had very low impact, and the SEC has not removed Cardano from the list of the tokens it considers security.
Having the SEC removing ADA from the tokens it considers under its jurisdiction would be a boost for the growth and adoption of ADA in the US but also internationally (as crypto has no frontier for the moment, and any way the market price of ADA is also driven by these US developments).
Also with the current situation, Cardano echosystem remains very vulnerable to any comment a US judge will make, on any crypto affair even if this is related with a token that cannot be compared with ADA (LBRY token or XRP for example). XRP lawsuit has brought the pendulum movement on the right side for ADA (secondary market sales not securities), but a single comment from a judge on Terraform Lab lawsuit, tends to bring it back to the wrong side.
This added to the fact that cryptocurrencies sued by the SEC are the ones thats can be considered securities as per US laws, and if the SEC gets more wins against crypto firms, the fact that cryptocurrency = security, at least during initial offering, will print in judges mind that crypto assets have to be considered securities, and ADA’s specificities will be overlooked by them because of the pendulum movement I was talking about, so it would be good to take actions at the moment when the pendulum is almost in neutral position rather than when it’s headed to the side where cryptos are considered securities.
So my proposal would be to :
1- Send an official letter to the SEC, explaining in detail why Cardano cannot be considered a security as per US laws (introduction in Japan, outside of the scope of juridiction of the US, sales done only on secondary market, Cardano becoming more and more decentralized, even at the level of its governance, which make impossible to determine who would be the emittor of the investment contract, ADA being a token but also Cardano echosystem being a development platform for smart contracts). We could also remind, that Gary Gensler, when testifying in front of the congress few months ago was not able to state if any cryptoasset was a security or not (even XRP!!)
2- If the SEC gives a positive answer to this letter (ADA not a security), this answer could be made public and give legal clarity in the US for persons willing to participate in Cardano echosystem.
3- If the SEC doesn’t anwser, or maintains ADA is a security without strong evidence, it would be necessary to initiate a lawsuit or a class action against the SEC complaining its wrong classification of ADA is a threat to the ecosystem, and impacts negatively the retail investors who are currently invested in the token.
This action would have the advantage to be proactive, and therefore would remove Cardano Community from its defensive strategy, and become more offensive .
Second advantage, if we make this lawsuit public would be to have broader public comment on the evolution of the lawsuit, as it is the case for XRP lawsuit, and therefore discuss more on the qualities and the decentralization of ADA, it would also bring ADA in the center of the debate as was XRP, adding to the popularity of the brand.
The risk would be to have the SEC, in return, initiating a lawsuit against a representative of Cardano for unregistered sale of Security, but initial distribution of ADA was intended to avoid this, so this lawsuit would be more likely lost by the SEC than the one against XRP, so it would be good publicity for Cardano.
The second risk would be that even with the evidences brought, the judge decides ADA is a security. My opinion about this is we already have the negative effect of this on the market value of ADA since ADA has been mentioned in Coinbase an Binance lawsuits, so it may not change so much the perception of market participants, and also, ultimately, a judge will have to state on this subject, and I think it’s better to do this at the moment we choose, rather than at the moment chosen by the SEC, when they would have won a significant number of lawsuits against crypto firms less immune than Cardano to Security regulation.
The last point is, as I’m not US citizen, not lawyer … and not very rich (one problem with the US is the justice is not the same whether you are rich and able to pay lawyers and eventually a settlement, or if you are poor and loose a trial not because you are wrong , but because you cannot afford paying more during an endless procedure).
So there would be the need for an entity to initiate the actions I mentioned above.
One of Cardano Foundation’s , missions is to act in favour of Cardano ecosystem growth, so these actions may be part of it. One risk, of doing this from CF, would be to provide a central opponent to the SEC linked to Cardano echosystem and therefore a target to Gary Gensler if he wants to sue an entity for sale of unregistered securities, but I’m not personally able to evaluate this risk.
Otherwise, if a class action mechanism was chosen this would require a number of ADA holders in the US to associate themselves and elect representatives to perform the actions I mentioned.
Please note this is only a proposal, and there may be other possibilities I have not seen. This topic could also be a way to see if some persons would be willing to bring their support to this kind of initiative, by answering this topic.
Last point, is Charles Hoskinson, and Cardano Foundation have stated their willing to collaborate with the authorities, and suing the SEC may not be in line with this principle, but I think the way the SEC behaves by suing companies which gave informations to them to get clarity shows a lack of empathy, and regulation by enforcement is not a collaborative approach anyway.
So trying to avoid the frontal conflict, is just a way to let the SEC decides when she wants to fight against you.