In the state of South Carolina, USA, just this week, the Security Division at South Carolina dismissed the cease and desist order which it had placed on Genesis Mining on 9th March 2018.
Genesis Mining is a company that sells bitcoin mining contracts. With its mining farms spread out throughout the globe, it is currently one of the largest cloud mining companies in the world. Five months ago, in March, the Security Division at South Carolina issued a cease and desist order against Genesis Mining, thus barring the company from its activities in the state – selling unregistered securities to the state residents.
Another company, Swiss Gold Global was also barred from its activities in the state. As stated in the Securities Commissioner’s administrative proceeding, Swiss Gold Global had not been registered as a broker dealer, which perhaps, it was working as for Genesis Mining.
In the five months subsequent to Genesis Mining’s ban, the company worked with the South Carolina officials at convincing them, that the mining contracts it sold via its website to not just South Carolina, but the entire world were in fact, not securities. In finance, a security is a trade-able financial asset which needs to be registered when sold in countries.
Convinced, the Security Division at South Carolina announced the termination of the cease and desist order.
The Securities Division of the Office of the Attorney General of the State of South Carolina, after receiving information regarding matters detailed in the Administrative Order to Cease and Desist issued … upon due consideration of such information, finds good cause has been shown to vacate the [order].
This was said by Tracy Meyers, the deputy securities commissioner on 26th July 2018.
Meanwhile Shah Hafizi, the chief compliance officer COO and general counsel at Genesis Mining claimed to have been working closely with the officials trying to guide them about mining and blockchain based products as he expressed his delight for the reverse of the cease and desist order:
We are happy to announce that the South Carolina securities division has dismissed Genesis Mining from its March 9, 2018, cease and desist. One of our company[‘s] principles is transparency. After all, it is a core value of blockchain technologies. Over the past five months, we’ve worked closely with South Carolina officials to educate them and provide a practitioner’s perspective on mining, blockchain networks and the decentralized nature of the technologies we support.
There was, however no statement given with regards to Swiss Gold Global, which still remains unauthorized to work in the state. In May, another blockchain startup, ShipChain was also banned from working. ShipChain, too resisted saying in a letter, that its tokens could not be considered as securities. With the announcement of withdrawal of the cease and desist order of Genesis Mining, ShipChain too was liberated of the ban. Genesis Mining will soon set out to work again in the state.
This is the first time in the history of blockchain and cryptocurrency when a company has resisted against a regulation authority and has been successful. This sets an example of how blockchain enterprises and companies can cohesively work with the regulation authorities. Supporting a cooperative bond between companies and regulatory authorities, Shah Hafizi also stated:
By working together with regulators, we can ensure that investors are protected, and innovation is not stifled. We believe for the industry to reach its true potential, companies and regulators need to collaborate. We strongly encourage blockchain companies, regardless of where they are in the world, to proactively engage with local regulators at all levels.
Regulation of the blockchain has remained and still does a big talk. Since the technology is new, discussions and executions of regulatory measures are still underway. In many cases, lawmakers of states determine the security measures; for instance, China banned ICOs in 2017 while in other instances, tracking mechanisms have been set up for cryptographic assets being monitored by the governments. More or less, there have been some big moves to keep the technology lead revolution in finance under control. However, as to which limit where this regulation will go to, still remains hazy. This also poses an indefinite future for blockchain based enterprises and other companies.