In a year of password turmoil, the Foreign Securities and Exchange Commission announced an agreement with Kraken, a password trading center, on February 9th, causing another shock. The head of the department, Gamo Gensler, explained the agency's behavior to the news media last week. it seems to be a password betting attack-part of the authentication system used by many blockchain platforms, including the world's second-largest Internet ethernet.

The immediate problem at the institution is that Kraken has been producing investment wealth management products that are not registered. Gensler told CNBC.com that, in fact, he was promoting the high return on betting on data encryption-up to 21%.

"the point is that they have not disclosed to the project investors that the project investors have taken the risk," Gensler said. " Beyond that, he seems to be suggesting that the SEC operation could have been very easy to deal with, requiring the Kraken to pay $30 million and shut down its bet business process:

Kraken knows how to register, and everyone else knows how to register. It's just a report on everyone's platform. They can go in and communicate with our talented people on the disclosure inspection team. If they want to give leverage, we are all neutral. Come and register quickly, because shareholders must disclose this kind of information.

However, not everyone in the password industry is completely satisfied with this response. Jason Gottlieb, a lawyer at law firm Morrison Vorster, wrote on Twitter: "I think the way SEC's' all password project can do is go in and apply for registration'is simply an amazing insult." "A lot of data encryption products are not registered at all."

Michael Selig, a lawyer at law firm Willkie Farr&Gallagher LLP, told Cointelegraph: "it's not as simple as submitting a statement on the SEC platform to apply for a chip program security." "the public offering of securities is subject to strict control, and the actual operating cost is high."

The agency's decision to sue Kraken is seen as the first round of a full-scale attack on passwords by British regulators. According to CNN News, "if approved by the people's court, this settlement will mark a potential turning point in the more comprehensive efforts of digital currency supervision and SEC to include this area in their jurisdiction." The New York Times guessed that the move could have a wide-ranging impact, including a likely ban on bets on retail investors in the US.

But maybe the industry is overreacting. In other words, as a way to repay the network verification system, the other block chain technology in Taihe County is betting that it is probably not on the SEC radar screen at all. At a time when the agency is most likely motivated by consumer protection concerns, it wants to use Kraken as an example, especially taking into account the collapse of FTX in November and the collapse of various data encryption credit companies.

Carol Gofus, an expert professor at the University of Arkansas and professor of law at Clayton N Little, told Cointelegraph: "Yes, I firmly believe that they [SEC] need to follow the example of Kraken, especially because it promotes a good opportunity for returns to reach 21%."

Kraken sets the return of the bet amount, not the lowest blockchain agreement. [.] To be honest, Kraken runs its new project in the form of the next investment agreement led by Howey. SEC uses Howey testing to determine whether a transaction meets the prerequisites of the investment agreement, and then SEC must apply for registration.

"this is an one-off act, not only to deal with the Kraken release problem, but also to signal to the entire industry that SEC feels there are problems with the role of bidding as a service," Melbert, a high-end lawyer consultant and head of global regulatory management at Consensys, told Cointelegraph. Bert said that if another chip service center could not notice the data signal, they could also expect SEC to act, adding:

"I think the SEC expects the sales market to figure out the content of this message and adjust it accordingly-because they are likely to prefer to turn to any question."

The main purpose of the foreign Kraken case is to ban its public and opaque personal behavior to retail customers, not just because it provides a sign post-as-a-service.OneselfMarkus Hammer, the lawyer and responsible person of the consulting management company based in Hammer, Switzerland, informed Cointelegraph.

Is Tai Fong in danger?

However, the sales market does not necessarily feel that this is an one-off behavior of the organization. Medical ether (ETH) plummeted about 6.5% on the day the mediation was announced, the largest one-day decline since mid-late December. As widely reported, Etherum changed from a work unit certification system to a risk confirmation (POS) consensus mechanism last year. This technological innovation, known as "joint effort", has been warmly welcomed by many people because it has reduced the huge energy consumption and carbon emissions of the Internet from the source. But at least some people worry that Etay Fong is now in the eyes of foreign regulators because of a new betting agreement.

However, it may be incorrect to equate Kraken with Tai Fong. As Michael Hogan, chief investment officer of pit bull investment management, told Cointelegraph:

The enforcement action of the Foreign Securities and Exchange Commission against Kraken is not the enforcement action of the consensus mechanism for confirming the rights and interests of Etherum application. This is also an enforcement action against Kraken giving chips to provide services. These are two different types of things.

In addition, Hougan said that even if SEC banned all chip services in the United States, Etherum could continue to run as a POS system quickly, although he didn't expect that to happen. "such activities will be transferred directly overseas or used directly by individuals," he said. There is still enough ETH to keep the Internet intact. "the key results show that foreign investors will lose good opportunities and risks to bet," he said. But the whole world will still come down.

"this is not for the chip service platform, but for the institutions and the chip service providers that operate the swimming pool," Gofus said. " "if the planner controls the pool of money and the rate of return"-as Kraken did-"then this behavior does show that SEC sees the plan as involving the distribution of investment agreements."

By comparison, she says, "if the blockchain protocol allows others to create pools," like Ethernet Square, "it's not necessarily within the scope of such a directive."

Bert said yes. The lack of specifics in SEC's lawsuit suggests that the bet itself is problematic. SEC Action immediately made an escrow bet on Kraken, which promised a special rate of return and combined assets, but did not disclose risk or cost. It kept quiet about the consensus mechanism for betting on ETH or any other chain brand.

Etherum also hosts a number of test cases (such as campaigns) that have nothing to do with investment. Just because the Internet has long become a consensus mechanism for confirming interests, it does not mean that its original coin, Tai Fang, should now be automatically classified as securities. It's important to take a look at "the lowest-level multifunctional block chain and the characteristics of separate ecosystems," Hammer said. In addition, he added, this will need to be evaluated on a block-by-block basis.

A big volley at the start?

All of this is likely to be good and true, but could it really be part of a more comprehensive attack on digital money and blockchain technology in the post-FTX era, rather than just part of the "project investment solutions" offered by a handful of centralized service providers?

"SEC focuses on a step-by-step approach to action, adopting a new enforcement action on the premise of previous enforcement action," Selig told Cointelegraph. "the cryptographic world is rightly worried. SEC is committed to escrow bets on new projects today, but will look at a wider range of bets on new projects in the future."

Bert focuses on a more limited resource perspective, usually "because this is the surface of this discontent." It remains to be seen whether SEC will become more and more sarcastic and pursue the role of key blockchain technology.

Constantine Richter, BlockdaemonCEO's co-founder and founder, seems to allow it. Richter told Cointelegraph: "for reporting, the wooden post itself does not seem to be a problem." "this shows that investors who have the strength to invest can reinvest in the project without using an intermediary escrow trading center."

Hou Gen said in an interview with Cointelegraph that he is not confident that it will not be easy to ban according to law:

Crypto has been severely cracked down by coordinated and strict regulation abroad. You can also see such a severe blow from the recent statements and actions of SEC and the recent struggle of FDIC, OCC and Federal Reserve meetings to restrict the data encryption industry into traditional banking business. "

This kind of behavior is worrying, but not surprising, Hou Gan added. The failures of FTX, Celsius, Genesis, BlockFi, Voyager and Terra over the past year "suggest that there are significant risks to the cryptographic ecosystem and, in some cases, the need for stronger regulation."

"this is far from the first US attack on the password," Gofus said. " The Foreign Securities and Exchange Commission has been holding a relative prejudice against encrypted assets for many years; this may be a continuation of this behavior [.] Because he once again invests money in case-by-case implementation, rather than giving a really beneficial map of compliance management routes, such as drawing up exemptions on the premise of customized disclosure.

"the first inning of the ninth inning."

It should be insincere for Gensler to invite a trading center like Kraken only to fill out a form on the SEC platform. SEC application for registration is a wide range of work. "this is an extremely difficult process, and when foreign investors look for traditional securities for the first time, it usually costs $1 million or more for legal, financial accounting and investment consulting," Gofus stressed. " It may take a long time for it to be granted.

But that doesn't necessarily mean Gensler will keep an eye on Etherum and other POS service platforms. As you may recall, this department head once taught a course on blockchain technology as an expert at MIT, and he knows a lot about decentralized networks and goals. He may have figured out that the technology brings a variety of non-project investment test cases, even PoS service platforms with validators, which are effective in ensuring the integrity of the Internet.

Hammer thinks that, in fact, Kraken's mediation may just verify that "SEC still doesn't know when consumer protection policies and regulations apply globally." Before the merger, SEC and the Commodity Futures Trading Federation also regarded Ethernet Fong as a commodity spot rather than a securities.

All in all, jurors are still likely to be difficult to solve as to whether SEC should start with a strong volley on the battlefield of limited resource control or digital currency and blockchain technology. Most people apply the former expression, but as Hu Gen gets the result:

"at this stage, strict regulation and severe crackdown will erase the password, or finally release its full development potential-I think it is too early to say. Proper and strict monitoring of progress may be amazingly good for passwords, but too much restriction or enforcement control is undoubtedly fatal. [.] Everyone is currently in the first round of the nine-inning competition.