Bitrabo Editorial
The United States Securities and Exchange Commission (SEC) has taken legal action against Binance, the largest cryptocurrency exchange in the world, with 13 accusations, including permitting trading of investment contracts. The SEC asserts that these assets are “crypto securities.” Examples of securities reported by the regulator include The SandBox’s metaverse tokens (SAND) and Decentraland’s MANA.
SEC Claims MANA and SAND are Securities
The metaverse, which advocates believe is still in its early stages but could be transformative in the future, is affected by questions surrounding whether or not metaverse tokens are securities, as alleged by the SEC, following their case against Binance, one of the top exchanges supporting the trading of MANA and SAND.
The SEC claims that Binance has continued to support crypto asset securities trading despite the regulator’s enforcement actions against those projects, using the continuous trading of TRX and REP as examples of Binance’s defiance.
Other exchanges might be hesitant to list tokens from popular metaverse platforms, hurting liquidity, due to their comments and the use of these assets as examples.
The case that the SEC filed in the United States District Court for the District of Columbia is currently undecided. Nevertheless, metaverse projects finding themselves in the crosshairs of regulators could be a setback, potentially hampering much-needed development as funds may be diverted to cover legal costs.
Challenges Slowing Metaverse Adoption
The metaverse presently faces a variety of challenges that are impeding its adoption. For instance, the effects of the 2022 crypto winter are still being felt. On average, metaverse token prices are still down by over 80% from their 2021 highs. MANA is down 90% from 2021 highs of $5.2, at $0.47, according to data from CoinMarketCap. As of writing on June 5, SAND is also down by over 90%, falling from as high as $7.4 to $0.53.
The drop in metaverse token prices coincided with a rapid decline in non-fungible token (NFT) activity. NFTs are crucial for the metaverse as they allow assets to be represented as unique transferable tokens.
In addition to price contraction, dApps for the metaverse are mostly incompatible, resulting in assets in different virtual worlds not being able to be ported to other ecosystems.
Also, adopters have observed that regulations have failed to keep up, implying that developers lack guidelines on how to release assets that may comply with regulations as utility tokens.
Hardware limitations are also proving to be a challenge. Available hardware is not ideal for existing metaverses, with Virtual Reality (VR) glasses being expensive and bulky, while Augmented Reality (AR) glasses are still in development.
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