The CEO of ChaChing Wallet, Thomas Schulz, has tweeted that a Securities and Exchange Commission (SEC) insider has informed him to “stay away from Tron (TRX).” There is no way to confirm if this information is accurate or if it has any gravity, but this tweet certainly got the crypto space talking. Tron (TRX) has declined five percent since the tweet was posted.
Tron (TRX) rallied from $0.011 near the end of November to a peak of $0.034 on Jan. 10, a 209 percent increase. Tron (TRX) now has a market cap of $1.7 billion and briefly went as high as $2.3 billion.
This has made Tron (TRX) one of the best performing cryptocurrencies over the past couple of months. This rally is perhaps fueled by the fact that Tron (TRX) is seeing increasing use for the development of dApps and smart contracts, at a time when Ethereum (ETH) is struggling due to the messy Constantinople hard fork situation.
It is possible that the sudden increase in Tron’s (TRX) value has put Tron (TRX) on the SEC’s radar.
In general, the SEC considers a cryptocurrency to be a security if it is issued by a centralized organization, investors buy the cryptocurrency in expectation of making profits, and the centralized organization receives money in exchange for selling the cryptocurrency. Only in cases where a cryptocurrency has become sufficiently decentralized, like with Ethereum (ETH), does the SEC say a cryptocurrency is no longer a security.
Tron (TRX) launched with an ICO in September 2017 and raised $70 million. The Tron Foundation holds 33.25 billion Tron (TRX), 33.25 percent of the total Tron (TRX) in existence. The Tron Foundation has locked up these 33.25 billion Tron (TRX) until the beginning of 2020, at which point they will be able to use them.
Therefore, not only was most of the circulating supply of Tron (TRX) sold in an ICO, but the Tron Foundation also will make money if Tron’s (TRX) price increases throughout 2019. Simultaneously, plenty of Tron (TRX) holders are based in the United States.
Further, the Tron Foundation purchased Bittorrent, and now Bittorrent has conducted an ICO which raised $7.1 million. Presumably people in the United States were not allowed to participate in the ICO, but that won’t stop people from obtaining the Bittorrent Token (BTT) at a later time.
All things considered, Tron (TRX) can likely be considered a security by the SEC, and Tron (TRX) is freely circulating in the United States, while the Tron Foundation CEO Justin Sun actively promotes Tron (TRX) to his 790,000 Twitter followers. The Tron Foundation and Justin Sun will make tremendous profits on Tron (TRX) if its price increases throughout 2019, since the 33.25 billion Tron (TRX) will be unfrozen at the beginning of 2020.
Therefore, Tron (TRX) could face SEC enforcement action at some point in the future, and this would be catastrophic for the Tron (TRX) market. If Tron (TRX) is declared to be an unregistered security it could be forcibly delisted from all crypto exchanges that operate in the United States, and the Tron Foundation could face heavy fines.
That being said, it is unknown when SEC enforcement action would occur, if any at all. The Tweet posted by the CEO of ChaChing is just a rumor at this point, and the SEC has not made any official announcements regarding Tron (TRX).