SEC gives OK to social media platform to issue stablecoin without registering as a security

The SEC letter issued on Nov. 19 says that its Division of Corporation Finance would "Not recommend enforcement action" against avatar social platform IMVU issuing its VCOIN digital asset under certain conditions.

The commission will allow the firm to offer the token without registering it as a security.

To abide by the no-action letter, IMVU needs to keep its new stablecoin from looking like an investment opportunity, which, for example, Facebook got tripped up doing with its Libra stablecoin.

The letter stated IMVU would need to make the token "Continuously available in unlimited quantities and at a fixed price" of $0.004, and would not "Promote or support listing or trading" of the token on any third-party platform.

In an apparent first, the regulatory body stated that it would not recommend enforcement action against IMVU for making VCOINs available for their "Intended purpose." According to the platform, users can buy, earn, and transfer the tokens off IMVU to convert to fiat.

In April 2019, the SEC confirmed it would not recommend enforcement action against aircraft company Turnkey Jet in the sale of its TKJ tokens.

A few months later, the SEC issued a similar letter for an 8th grader who wanted to release tokens for her crypto gaming company Pocketful of Quarters.

"This no-action letter is meaningful because unlike the other two, this is the first time an ERC-20 token is being blessed by the SEC - it's saying 'hey, take it off platform,'" John Burris, IMVU Chief Strategy Officer said to Cointelegraph.

Because the SEC letter says the VCOIN tokens can't be transferred to third-party platforms, IMVU users will be able to send them out of the virtual world and into a private wallet, where the company said it will buy them back as requested for a 10% transaction fee.

IMVU is planning to start selling the token in the virtual environment starting in January.