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Social networks and the digital economy: A preview of IMVU’s VCOIN

After getting some boundaries in which to operate from the SEC, IMVU’s new blockchain-based token will be a major test case for crypto.

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When the Securities and Exchange Commission gave its blessing to social media platform IMVU to launch VCOIN, it was a major leap forward for acceptable scope of crypto applications. 

The implications for what sorts of projects the SEC considers a security are, in and of themselves, huge. But part of the appeal of VCOIN to the SEC is that, with its stable price and clear use case, IMVU has managed to demonstrate to the commission that the token is a means of making the platform a more lifelike digital world that is more fun to hang out in.

For those unfamiliar, IMVU advertises itself as “a social experience.” It’s similar to Second Life in that users take on 3D avatars with which to explore a world. In IMVU’s case, that world is mostly bars and clubs — 3D environments overlaid onto chatroom dynamics. But people spend money on those things and, in IMVU’s case, send money to each other.

We have the economy…

Using its existing credits, priced at 1,000 to the dollar, IMVU already hosts an economy featuring a monthly 27 million transactions that add up to $14 million. According to John Burris, the “comprehensive virtual economy” is worth some $45 million, and its existence is central to IMVU’s appeal to the SEC.

Burris, who is IMVU’s chief strategy and blockchain officer, recently demoed the new platform for Cointelegraph, proudly pointing out a living internet economy that owes debts to social media, chatrooms, massive multiplayer online gaming and, now, blockchain:

“This is the VCOIN play: We have a massive virtual economy that’s driven by our users. So the users are the ones who create all the virtual goods — all the virtual outfits, furniture for your room, animations that your avatars can do, and they also create all the virtual I’ll call them services. They’re the ones who host nightclubs on the platform or can help you dress up your avatar or who will run the pub where they’re watching the Premier League soccer game. They’re the ones running all these experiences on the platform.”

The scale of VCOIN’s prospective userbase is unprecedented among SEC no-action letters — which basically certify that the commission will not consider a token a security if it abides by certain stated provisions. The SEC has said that cryptocurrencies like Bitcoin and Ether are also not securities, but that is because they do not owe their success to any single entity. Decentralization has its legal benefits, in other words.

Centralized and contained

VCOIN is obviously a centralized project by IMVU, and nobody is making any bones about it, but the no-action letter is acknowledgment that VCOIN is a utility token, with IMVU’s internal economy as its use case. While users will be able to take VCOIN off of IMVU’s platform and into Uphold wallets, IMVU’s platform should remain their primary use. This provides the SEC with another feature they hold dear: Siloed usage.

Comparing VCOIN to, say, Facebook’s Diem (formerly Libra), there are similarities. Namely, an existing social platform trying to overlay a fiat-pegged token onto its network. However, seven million users is obviously not the same as two billion, and the limits to VCOIN’s use case are largely within the confines of its virtual world. Despite the ability to shift value off of the platform, there’s no reason to expect the bulk usage of VCOINs to move outside of its monetary snow globe. Facebook, on the other hand, with its Marketplace alone could link Libra up with the ability to buy real houses, cars, or, if the Republicans of the Financial Services got their way, guns.

Global use inside the snow globe, and where KYC will factor in

A noteworthy provision of IMVU’s plan is that users will be largely free to exchange VCOIN among themselves within its snow-globe environment without know-your-customer identification. “We wanted there to be no KYC, for a majority of users; the ability to purchase, spend, hold, send to other users, pay with VCOIN without KYC,” said Burris. There are certain countries where users will simply not have access to VCOIN — China being a notable example. But according to the team, users from 140 countries will suddenly be able to transact.

KYC will kick in, however, when those coins leave IMVU’s purview for the off-platform crypto wallets, which is where they will actually run on a blockchain rather than IMVU’s ledger. The traditional hard barrier where KYC becomes essential for most crypto businesses is when a user looks to convert crypto into fiat or back again. This is another area where the boundaries of IMVU’s platform help it go beyond normal compliance requirements.

Conservative partnerships for cautious regulators

VCOIN’s wallets, in turn, will be under the management of Uphold, an established U.S.-based hot wallet provider rather than IMVU itself. This ties in to another standing concern by U.S. regulators. Casting back to the Libra squall, another area of suspicion was the Association’s affiliate, Calibra. Despite subsequently rebranding to Novi — so it didn’t actually include the word “Libra” in it — Congress correctly identified these organizations as linked.

The idea of launching a new coin dependent on a new wallet dependent on the same company’s development, and then giving that project immediate access to Facebook’s two billion users was a bridge too far. The partnership with an established crypto firm seems to be picking up with U.S. regulators as the preferred alternative. It’s how, with Paxos’ help, PayPal got New York’s Department of Financial Services to sign off on its crypto launch in October.

And what about speed? While what Cointelegraph got to see was only a demo version of the final platform, the exchange of VCOINs between users worked about as close to instantly as you can ask for.

While all the provisions that make IMVU appealing to regulators may rub the crypto faithful the wrong way, Burris thinks it’s more about advancing crypto’s utility for regular users than pushing the boundaries of what blockchain technology can do:

“We think we’re launching something really special here. We know we are for the gaming, avatar, social space, but even in the crypto space. As, over the last two plus years, I met with all the big players in the space and those pushing activities around, large protocols, everybody’s looking for real applications. I do think the DeFi stuff has crushed it and I love that category, but I think we’re all looking for true use cases for these kinds of experiences.”

So, stay tuned for launch to see if the system that IMVU has set out manages to satisfy both users and regulators alike. The snow-globe marketplace of IMVU may end up a schematic for the next phase of digital economies.

Source: https://cointelegraph.com/news/social-networks-and-the-digital-economy-a-preview-of-imvu-s-vcoin

Blockchain

Pawtocol CEO Karim Quazzani on New to the Street

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Pawtocol is a global online community of pet lovers who are disrupting the pet industry by leveraging blockchain technology while monetizing data about their pets.

Pawtocol

Data is aggregated from IOT devices like our Blockchain Dog Tag, vets and more. Users maintain full control over the data about their pets

Pawtocol CEI(ETN) CEO Karim Quazzani dicusses the latest developments with Jane King on New to the Street

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ABOUT US
Exploring the Block profiles Blockchain Technologies and Companies. Exploring the Block produces multi-part series following the goals and achievements of the companies we follow and invite our audience to track the growth and challenges these companies face. Each series provides personal look at the company through the eyes of the CEO or company executive as they discuss their goals, roots and products with our experienced team of anchors/journalists to provide our viewing audience with who, what, where, when and why about the companies you want to learn about.

New To The Street profiles public companies, advertises and markets their products and services, and provides business news. New To The Street paves the way to the latest financial issues, offering a blend of business and financial services news reporting and in-depth interviews relating to new products, economic analysis and public company profiles. New to the Street is produced by FMW Media Works Corp.

FMW Media
FMW Media Corp. operates one of the longest-running U.S and International sponsored programming T.V. brands “NewToTheStreet,” and its blockchain show “Exploring The Block.” Since 2009, these brands run shows across major U.S. Television networks. These TV platforms reach over 540 million homes both in US and international markets. Developing 2-additional shows “TheBestinNY” and “The Ultimate Listing0”

Source: https://exploringtheblock.com/pawtocol-ceo-karim-quazzani-on-new-to-the-street/

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Blockchain

Nebraska senator introduces bills to allow state banks to custody crypto

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A Nebraska state senator has proposed new crypto-friendly legislation which could see his state become the next regulatory safe haven for FinTech firms.

Sworn in just two weeks ago, Republican Mike Flood today introduced the Transactions in Digital Assets Act and Adopt the Nebraska Financial Innovation Act to the state’s 107th Legislature.

The two bills lay out guidelines for state banks to be able to custody digital assets in addition to creating financial institutions dealing in digital assets for which Nebraska would provide “charter, operation, supervision, and regulation”. The measures would also give local courts the jurisdiction to hear claims “in both law and equity relating to digital assets.”

The proposed legislation will likely move to committee before a general file in the state legislature, where Republican lawmakers currently outnumber Democrats almost two-to-one, 32 to 17.

The proposed bills also aim to address the problem of major banks in the United States discriminating against businesses and individual customers using crypto.

“The rapid innovation of blockchain and digital ledger technology, including the growing use of virtual currency and other digital assets, has resulted in many blockchain innovators and consumers being unable to access secure and reliable banking services, hampering development of blockchain services and products in the marketplace,” states the second bill.

“Many financial institutions in Nebraska and across the United States [refuse] to provide banking services to blockchain innovators and customers and also [refuse] to accept deposits in United States currency obtained from the sale of virtual currency or other digital assets.”

Flood, who previously served as a member and speaker of the Nebraska Legislature until 2013, said he planned to introduce bills intended to make his district a FinTech hub. In a meeting of the Norfolk Chamber of Commerce’s Governmental Affairs Committee last Wednesday, the state senator described cryptocurrency as a market with “great opportunity” for Nebraska.

“This is the future,” said Flood. “To be on the cutting edge of [crypto], I think, is good for us. We need to be a leader in FinTech. We in Norfolk have as much right to this new market as any other place in America.”

Under the 10th amendment to the U.S. Constitution, state laws can often be independent of, or even contradictory to federal laws. One example of this in the crypto space is exchanges such as Binance U.S. having to go state by state to legally make its services available to U.S. residents.

Last July, the Office of the Comptroller of the Currency announced that federally chartered banks would be allowed to provide custody services for cryptocurrency. Though the measures Flood proposed would not be needed for federally chartered banks in Nebraska, the proposals seemingly attempt to extend this benefit to state-chartered banks.

Source: https://cointelegraph.com/news/nebraska-senator-introduces-bills-to-allow-state-banks-to-custody-crypto

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Blockchain

Some institutional investors taking profit as Bitcoin retraces

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A new report from crypto fund provider CoinShares has indicated that some institutional investors have been realizing profits during BTC’s recent consolidation.

CoinShares’ weekly digital asset flows report identifies $85 million in outflows from institutional crypto products this past week, asserting the data suggests “some investors are continuing to take profits after [BTC’s] strong price appreciation.”

The report noted the rising (trade-weighted) U.S. dollar, stating the USD index “is typically inversely correlated to Bitcoin prices,” and could explain why some investors are taking profits at the current levels.

The firm also identified modest outflows from Ethereum-derived investment products, with $3 million leaving the markets.

Despite the profit-taking, institutional inflows remain strong, with $359 million flooded into crypto investment products this week. Institutions still appear almost single-mindedly focused on BTC, with Bitcoin products representing all but 1% of the week’s total capital flows.

CoinShares notes that crypto inflows have returned to their pre-Christmas levels, following the 97% drop over three weeks seen after the holiday break. Daily volumes are currently up more than 450% year-over-year.

Institutional products currently represent 6% of combined Bitcoin volume — down from 14% at the start of the month.

Much has been lately of the growing institutional appetites for crypto, with major global companies recently filling their treasuries with BTC.

After hosting more than 11 million BTC worth of futures trade in 2020, Chicago Mercantile Exchange announced last month that it plans to launch cash-settled Ethereum futures contracts in early February, pending regulatory approval.

On Jan. 20, Ninepoint Partners filed its final prospectus for a Bitcoin Trust conditionally approved by the Toronto Stock Exchange.

Source: https://cointelegraph.com/news/some-institutional-investors-taking-profit-as-bitcoin-retraces

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