
Edit Story

The Case Of Authorities Vs. Kik: What Do We Know So Far?

Yoav Vilner

What a year 2018 has been for the crypto-sphere. We've seen the roller coaster dive down from the sky and into the ground, followed by regulatory action that is still just starting to take place.

January of 2019 marked the month where things got real. Kik, The messaging platform, which focused exclusively on privacy-centric data sharing since 2009, may be in a bind with the SEC.

Known as the first and only secret chat app for teenagers across Android, Blackberry, and iPhone devices, Kik has launched a cryptocurrency called Kin in 2017. It’s powered on the Ethereum blockchain, and reserved for in-app transactions.

The messaging platform then launched its fundraising initiative, an ICO that raised $97 million. Today, the SEC is claiming that Kik’s Kin coin is actually a security token, and that its distribution to both users and investors violated a set of securities regulations.

Kik was served a “Wells Notice” by the SEC a few months back, that stated its token should have been registered with their agency according to law and practice protocol. Here’s the catch: Kik has remained adamant that Kin is a currency, not a security token, and therefore does not need to be registered with the SEC.

As a result, Kik is said to put up a fight and prove themselves as security-less. So far, Kik has replied to the SEC’s “Wells Notice” with a claim of innocence, stating that the ICO involved no illicit activity or committed fraud in the slightest.

Kik vs. the SEC is expected to be a defining and historic moment for the worlds of cryptocurrency and blockchain. The outcome will have an impact on all market coins - present and future.

Due to 2018’s bear market, top currencies are at a trading and investing standstill. Experts believe that the only way to surge the market upward would be with the approval of Bitcoin ETFs - a pursuit lacking support by key regulators in the space. If Kik wins against the SEC, it could set Bitcoin ETF approval into motion and have a significant effect on the future of crypto as we know it.

If found to be a security token offering that was executed as an ICO without proper registration and regulation, the fallout will be a refund to all Kin investors, as well as the stripping of the token’s existence.

“Cases like Kik’s highlight the need for clear regulatory definitions, of what constitutes a utility token versus a security token, and where those tokens can be sold," told me Adityo Prakash, Executive Director of BlockRules. "In the long run, we need blockchain technology that can ensure that token issuance and trades around the globe comply with all applicable regulations. Such a system will allow legitimate blockchain enterprises to bring new investment opportunities to a global investor community, without having to worry about regulatory repercussions."

Michael Breidenbrücker, CEO at Slant, told me that “the primary goal of every regulatory body is to protect the consumer, and from a consumer’s perspective, I understand and agree with the SEC. However, the concept of securities, currencies, and utilities might be a bit outdated, and I am not sure if the crypto market can be regulated with what might be outdated concepts,” Breidenbrücker said. “With crypto, we need to look beyond the concept of securities and currencies and really think about the function of crypto in our society. Once we know that, we can start to talk about regulation.”

Earlier this month, it was also found that a 2017 YouTube video by Kik might hurt their chances of fighting back. In the video, Kin's CEO was answering questions in a physical meetup, where some of his answers from back then actually contradict present claims against the SEC's decision.

It's important to remember that Kin was not a special case, but just a more "successful" and notable project. There were in fact thousands of other projects that I would hope be pursued first, not to mention those by founders who actually never meant to build a real company or a product.

Either way, hopefully this case will help the space improve its token identification protocol, while allowing the agency to continue its efforts in cleaning up the debris left behind by the old “Wild, Wild West” days of ICOs.

Follow me on TwitterCheck out my website

Yoav Vilner is a world recognized startup mentor, industry leader and entrepreneur.