Victor Ugochukwu · Dec 14, 2020 . 5min read
SEC issues No Action Letter for Avatar Social Network IMVU’s token sale
The US SEC issued a no-action letter on Thursday to Avatar Social Network, IMVU, thus conceding the firm to sell its VCOIN digital tokens.
By Komal Joshi · Nov 21, 2020 . 6min read
The U.S. SEC issued a no-action letter for a cryptocurrency-based startup named IMVU that it will not seek enforcement action against them for selling their digital tokens. The Securities and Exchange Commission (SEC) mentioned the reason behind the decision of a no-action letter. It indicates that the SEC won’t deem the selling of IMVU’s VCOIN tokens as a security sale. Thus, registering the sale is not necessary. VCOIN is specially developed on Ethereum. Creators can use it as a royalty system. Thus, users can receive compensation for rendering services.
The no-action letter asserts that the SEC’s Division of Markets and Trading will not approve an enforcement action based on several assumptions that involve, among other things, that the VCOIN tokens will not be sold on secondary markets. The sale also must be directed to know-your-customer (KYC) and anti-money laundering requirements.
SEC’s NO Action Letter involves eight significant restrictions
However, the no-action letter comprises eight important restrictions linked to IMVU offering. Distinctly, the company has promised not to utilize any funds from token sales to expand its platform, network, and applications. Moreover, IMVU will inflict limits on VCOIN conversions, acquisitions, and transfers. It is essential to see that the requirements by IMVU are not part of any formal request by the SEC. Moreover, the company must not promote the listing of tokens on third-party trading platforms.
For the uninformed, IMVU is a 3D avatar social networking platform. It enables registered users to customize their characters, unite with friends in 3D chat rooms, and build new ones across the globe via shared experiences. IMVU also hosts a marketplace highlighting a catalog of virtual goods offered by over 50,000 creators. Moreover, IMVU is proposing to develop a crypto-centred media platform and a decentralized ecosystem where all participants will hold a stake in its extension. Thus, earning money for their contributions to the network.
The SEC first issued a no-action letter in the Ethereum context in 2019. It gave the green light to a token sale by a gaming startup. It approved the first-ever Ethereum token sale from blockchain-based gaming startup Pocketful of Quarters (PoQ). In a no-action letter, the SEC stated that PoQ might sell its Quarters tokens (based on ERC-20 standard) without listing them as securities.
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