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SEC Ramps Up Crypto Asset Examination
February 16, 2023February 16, 2023

Crypto Capital Venture Founder Believes Cardano is Unlikely to be Considered a Security by SEC

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Dan Gambardello, the founder of Crypto Capital Venture, has shared his thoughts on the regulatory status of Cardano’s native cryptocurrency ADA that Capital Venture Founder Believes Cardano is Unlikely to be Considered a Security by SEC . In a tweet to his over 239K followers, Gambardello noted that Cardano’s initial coin offering (ICO) was held in Japan and was not available to investors in the United States. He also pointed to a recent legal case involving the SEC and the LBRY project, in which a judge clarified that secondary sales of LBRY’s LBC tokens were not securities. Gambardello believes that this precedent could be relevant for ADA’s regulatory status.

The SEC sued LBRY in March 2021 over the sale of its LBC tokens without registering with the regulator. The LBRY team did not offer the tokens through an ICO, but instead kept some tokens for themselves before releasing them on secondary exchanges to fund operations. The judge in the case argued that LBC tokens incentivized the project’s team to keep building on the network, which suggested to investors it would be a profitable investment on the secondary market. However, during an appeal hearing last month, a judge clarified that LBC tokens are only considered securities at the time of direct sale.

Gambardello’s comments come at a time when Cardano has just undergone a new hard fork, which has been seamless for the network. Last year, he praised Cardano for silently positioning itself as the most sound, secure, and scalable blockchain. The recent launch of Cardano-powered algorithmic stablecoin Djed ($DJED) has been successful, with over 31.5 million ADA tokens backing it, and the reserve ratio remaining high. Djed is a formally verified algorithmic stablecoin backed by cryptocurrency and designed by IOG, the company behind the development of Cardano.

The regulatory status of cryptocurrencies has been a contentious issue in the US, with the SEC taking a strict stance on unregistered securities offerings. The SEC’s lawsuit against Ripple Labs, which owns the XRP cryptocurrency, has been a high-profile example of this. The SEC alleges that Ripple raised $1.3 billion through the sale of XRP without registering it as a security, and has sued the company and two of its executives. Ripple denies the allegations and claims that XRP is not a security but a digital currency. The case is still ongoing.

Cardano has been positioning itself as a sustainable and eco-friendly alternative to Bitcoin, which uses a large amount of energy for mining. The Cardano network uses a proof-of-stake consensus mechanism, which consumes far less energy than the proof-of-work mechanism used by Bitcoin. The Cardano team has also launched the “Africans for Cardano” project, which aims to bring the benefits of blockchain technology to Africa, particularly in areas such as identity, supply chain management, and finance.

In conclusion, Gambardello’s comments on Cardano’s regulatory status add to the ongoing conversation around the regulatory environment for cryptocurrencies in the US. While the LBRY case may set a precedent for the regulatory status of ADA, it remains to be seen how the SEC will ultimately classify the cryptocurrency. Cardano’s focus on sustainability and its potential applications in Africa demonstrate the project’s wider ambitions beyond simply being a cryptocurrency.

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