The more vigilant readers among you might have noticed a significant number of coins being delisted from the major exchanges this year.
Since being acquired by Circle in February 2018 for an alleged $400 million, Poloniex has ‘vetted’ numerous assets and if they cannot demonstrate compliance with the regulations around assets vs securities, then they have been delisted.
Shortly after its acquisition of Poloniex, Circle published its Asset Framework giving an outline of what Circle would be looking for when deciding whether or not to list an asset. This framework consists of a number of criteria covering five categories: the project’s fundamentals, the people involved, the technology driving the project, its business model, and its market. The framework was also published soon after it was reported that Circle is seeking to acquire a United States banking licence.
A shockwave went through the community when in April 2018 Poloniex announced the delisting of 17 coins with no explanation. Further delists were announced in July, August and September, when Poloniex announced the delisting of a further eight assets (BTCD, BTM, EMC2, GRC, NEOS, POT, VRC and XBC), giving holders of those coins just one week’s notice of the intention to delist. Although holders still had a month to finalise trades or remove the coins from the exchange, it still caused many assets to plummet in value. Whilst a coin with a large market cap may be able to shrug it off, there’s nothing that sounds the death knell of a smaller coin like a delist. In a project statement following the announcement, the understandably aggrieved-sounding XBC admin wrote: ‘In their correspondence [Poloniex] do not actually provide a reason for the delisting nor will they provide one when asked’.
All this can be explained in one word: regulation. On 7th March this year, the Securities and Exchange Commission (SEC) made a public statement which said that ‘if a platform offers trading of digital assets that are securities and operates as an ‘exchange’ as defined by federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration’.
On the same day as this announcement, but gaining somewhat less publicity, Bittrex announced the delisting of no fewer than 82 altcoins on the basis that they did not meet the exchange’s ‘strict coin listing criteria’. Some of the delisting decisions may have been based on other factors such as consistently low liquidity, malfunctioning wallets or broken blockchains, but as Bittrex has also announced its intention this year to seek greater regulatory compliance, the only logical conclusion is that there is a ‘regulatory purge’ taking place in the crypto exchange world.
Backed by the global investment giant Goldman Sachs, Circle aspires to be the first fully regulated crypto exchange. However, Circle also seeks to register with the SEC as a brokerage and trading platform (enabling it to also trade in securities).
One reading of this sequence of events would be that Circle has a two-part plan, the first of which is to get its US banking licence; but to demonstrate its aim to be the squeaky-clean face of crypto, it is weeding out anything that could be interpreted as a security and therefore compromise its legitimacy in this respect. To this end, all assets are being required to submit a substantial and detailed legal document called a Memorandum, which is an analysis of the asset stating that it should not be classed as a security.
There is a very specific definition of a security (as opposed to an asset) and there is a wealth of information available explaining the difference, but for every new coin, token, asset that is introduced there has to be an evaluation of it. The bottom line is that if a coin applies to an exchange for listing, and it is deemed to be a security, then it is unlikely to be listed, unless or until that exchange is listed with the SEC.
Radium Core asset holders will be reassured to know that the Radium team are completely up to date with this and have recently acquired their own signed off Memorandum thus adding weight to Radium’s future listing potential.
Linda P 12/11/18
