Cardano’s parent company Input Output Global (IOG) responds to the recent filing made by the Security and Exchange Commission (SEC) that declares ADA as a security. IOG strongly defended itself, claiming that its native coin ADA is registered under U.S. laws.
On June 6, 2023, SEC listed 12 cryptocurrencies as securities, causing an uproar in the market.
SEC filing on Cardano
SEC’s anti-crypto mission seems to be moving forward as the recent lawsuit against Binance and Coinbase. The US authorities have been on a continuous crackdown against cryptocurrencies and stablecoins.
The June 6’s court filing, which was mainly for Coinbase, listed Cardano network and ADA in the additional section of illegal securities. On June 8, 2023, IOG fired back calling it “numerous factual inaccuracies.”
The company also criticized the government’s vague regulatory laws. “Regulation through enforcement action does not provide either the clarity or certainty to which both the blockchain industry and consumers are entitled” the statement reads.
When is a Cryptocurrency declared a Security?
A cryptocurrency is generally considered a security when it meets the criteria defined by securities laws and regulations.
In the US, the Securities and Exchange Commission (SEC) utilizes the “Howey Test” to determine whether a cryptocurrency qualifies as a security. The Howey Test states that cryptocurrency is a security if it involves an investment of money in a common enterprise with an expectation of profits solely from the efforts of others.
Impact on ADA Price
The SEC lawsuit affected the ADA prices as many investors continue to sell off the coin. According to CoinMarketCap, Cardano suffered from a 10.38% drop in prices in the last 7 days. Currently, ADA is trading in the range of 0.33 with a market cap of $11b.
The immediate response from IOG has prevented to coin to slow down with the drop. However, fear instills among all traders and investors of whether the coin is safe from the claws of the SEC.
Reference: Official statement