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SEC To Hold Smart Contract Developers Liable for Violation of Regulations

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Following its recent stint with Ether delta, Unites States Securities and Exchange Commission has decided to hold any developer of smart contract whose identity is revealed to be liable for usage of his program / code in case of any activities that violates the Commodity Futures Trading Commission (CFTC) regulations or doesn’t meet the requirements of acceptable trading parameters. Recently when SEC charged Etherdelta founder Zachary Coburn for non-compliance, the SEC referred to smart contracts as “a code or program that provide the means for investors and market participants to find counterparties, discover prices, and trade a variety of digital asset securities”, in its Statement on Digital Asset Securities Issuance and Trading published on Nov. 16. But this ruling has created greater concerns for developers which are still being debated in the community as the SEC may not make a distinction between the developer of a piece of code and the end user in future as the SEC’s report notes state :

“An entity that provides an algorithm, run on a computer program or on a smart contract using block-chain technology, as a means to bring together or execute orders, could be providing a trading facility.”

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This implies that if the creator of a smart contract used to facilitate decentralized trading can be identified, that individual could conceivably be held liable for securities violations.  Normally code is something that code is neither “good” nor “bad” as it is a piece of program predefined to complete a task based on rules / conditions mandated by their creator. However emergence and development of smart contracts which slowly permeated into crypto industry greatly affected and changed the way crypto and block chain tech were understood and worked as they control majority of crypto tech related functions these days. This is a hassle for regulators like US –SEC as the crypto currency industry’s reliance on smart contracts increases made it harder for transactions and trades to be tracked and regulated.

Following the developments, the team behind the forthcoming Grin cryptocurrency, which makes use of Mimblewimble privacy tech have chosen to remain anonymous much like Satoshi Nakamoto who remains anonymous  for nearly a decade despite developing a market shattering piece of code like block chain or bitcoin as the SEC can’t prosecute those whom it doesn’t know. And moving forward, now that the situation has turned out to a pinch for developers in crypto-community who have  or would like to have anything to with a code/program that could probably facilitate unregulated action and be held liable, for U.S.-based developers who wish to remain free to code without worrying about legal liabilities, the only solution now is to remain anonymous.

 

 

 

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