MotleyFool consulting firm has warned investors about the ApeCoin metaverse coin project and the Bored Ape Yacht Club. According to the firm, he states that the SEC investigation could create problems for investors and other cryptocurrencies in the future. Expert R. J. Fulton explains why.
The company behind the popular projects: Yuga Labs
Probably the best collection of non-interchangeable Tokens (NFT) on the NFT market from Bored Ape Yacht Club (BAYC). Photos of these monkeys in different clothes and with different facial expressions made a splash on the Internet. He has also attracted the attention of celebrities such as Snoop Dogg, Justin Bieber, Jimmy Fallon and Kevin Hart. The prices for these NFTs have increased at some point. Six of them sold for more than $2 million. Moreover, in October 2021, BAYC was sold for a tearful $3 million.
However, it may not be known that the company is actually behind BAYC NFT. Yuga Labs started work on BAYC in February 2021, and released the collection in April of the same year. As her fame and notoriety skyrocketed, the company took another step forward. He now owns the rights to other popular NFT collections, such as CryptoPunks and Meebits.
Yuga Labs did not stop there. This year he launched his own metaverse project ApeCoin (APE). He also launched Otherside, a metaverse platform where investors can buy virtual real estate using his new ApeCoin. In a short time, Yuga Labs has established itself as an industry standard for the development of Web3 and metaverse technologies. So much so that it was even compared to Disney Web3.
Probably, the metaverse coin project will face problems in the future
But now this NFT star is likely to face some hurdles. Earlier this month, the Securities and Exchange Commission (SEC) announced it would investigate Yuga Labs over concerns that BAYC NFT and ApeCoin may be unregistered securities. Immediately after the news, ApeCoin fell by 10%. Consequently, investors in Yuga Labs assets may get more pain.
The investigation itself is not an accusation. However, the situation changes if assets are considered securities. Possible consequences of this situation include fines, compensation, and even civil or criminal charges. To determine whether an asset is considered a security, the SEC uses the Howie test. The Howie Test, named after a Supreme Court case in the 1940s, defines a security as “an investment of money in a joint venture with the expectation of profit from the efforts of others.”
Let’s open it up. The key points here are “expectation of profit” and “efforts of others”. It is likely that ApeCoin was created by the efforts of others, especially developers who probably spent hours writing and analyzing code. After it entered the market, investors most likely bought ApeCoin, hoping that it would make a profit. The same goes for NFT BAYC. People bought them because of the potential value they could create. Do you see where this is going?
What should investors pay attention to?
The question of whether cryptocurrencies and NFTs are securities is part of a growing dilemma that is gradually coming to the fore on the SEC’s agenda. There is no official legislation yet. Despite this, it is likely that the SEC will include cryptocurrencies and blockchain companies like Yuga Labs in its jurisdiction.
Classification of crypto assets as securities does not mean the end of cryptocurrencies. However, it will definitely radically change the landscape. In the future, when the SEC becomes a cryptocurrency watchdog, it will probably require companies and blockchain developers to register as securities and provide additional information to increase transparency, as is currently the case with public companies.
If this is what awaits us in the future, it probably means the end of the “pump and dump” cryptocurrency, when developers swallow a new cryptocurrency or blockchain, get rich and leave the bag in the hands of investors. Every investor should make sure that his portfolio has everything necessary to pass the upcoming regulation. To do this, they need to keep this in mind before buying cryptocurrency.