The long-term expansion of MATIC is threatened by the SEC’s classification of the company as a security. Find out how difficult it was for MATIC to deal with government oversight.
In a major blow to the cryptocurrency industry, MATIC, the blockchain token of Polygon, is now facing an uphill battle for growth after being officially classified as a security by the US Securities and Exchange Commission (SEC). The revelation came to light during a recent filing against the popular cryptocurrency exchange Binance, where MATIC is one of the 13 tokens designated as security.
The announcement immediately impacted MATIC’s price, with the token experiencing a significant drop of 31% within a week, setting a new record for the most significant decline in such a short period. However, there is a glimmer of hope for MATIC holders as the token has rebounded, witnessing a promising recovery of over 11% in the last 24 hours.
The developer of MATIC, Polygon Labs, swiftly responded to the commission’s classification through a statement posted on Twitter. The company defended Polygon, emphasizing that the network was developed outside the US, deployed outside the US, and primarily focused on the global community that supports the network.
The commission’s move against Binance and the subsequent lawsuit against Coinbase, alleging that the company is operating an unregistered exchange, has created an atmosphere of fear, uncertainty, and doubt in the cryptocurrency market. Investors have become cautious, and as a result, Bitcoin, the leading cryptocurrency, has gained dominance amidst the regulatory actions targeting significant exchanges.
SEC Classifies Multiple Tokens as Securities Under Howey Test
Aside from MATIC, other tokens listed in the lawsuit include SOL, ADA, FIL, ATOM, SAND, MANA, ALGO, and COTI. The commission classified these tokens as securities based on the Howey Test, determining if an asset qualifies as a security.
This latest development is part of the government agency’s ongoing efforts to regulate the cryptocurrency industry. Earlier this year, the regulatory body cracked down on Kraken’s staking service, imposing a penalty of $30 million for violations. Failure to comply with the SEC’s regulations by the mentioned tokens and companies could potentially lead to a situation similar to the Ripple case, which profoundly impacted the market.
MATIC is currently finding support at the $0.6 price level, which could be a launching pad for future bullishness. The token’s momentum and price actions in the near future will be impacted by external market forces. The recent lawsuits have already caused significant losses for investors, slashing millions upon millions of potential gains.
As the cryptocurrency market grapples with regulatory challenges and increased scrutiny, it remains to be seen how MATIC and other tokens will navigate these turbulent waters and find a path toward sustainable growth.