This isn't a regulated security, so there's no 'official' name for what they're doing.
Basically, there was a private offering previously where large amounts were sold to selected parties. What is being blocked is the public 'offering' where these tokens can be publicly traded.
The SEC is saying that Telegram Group is clearly offering a security, and thus is subject to regulation. Indeed, what Telegram is doing is significantly different from 'classic' crypto issuance a la Bitcoin. There was no company or legal entity responsible for Bitcoin, let alone one that could control the network while profiting off of it. They have similar opportunities for the sort of financial malfeasance that the SEC is designed to mitigate.
Personally, I find it extremely difficult to argue with the SEC's position.
I strongly support cryptocurrencies, namely Bitcoin, but also recognize that these pre-mine coins are entirely different on many levels. They are hilariously vulnerable to abuse, only just rising beyond the level of an outright scam.
If it's fungible and negotiable, it is a security, if it is a security, it is regulated. If you try to move something that is fungible and negotiable, it is offered, therefore an offering, therefore regulated.
The Howey Test[1] is the more precise definition of what a security is. For instance, physical metals are fungible and negotiable, but are not securities in themselves. Gold coin dealers are not regulated by the SEC if they sell you actual physical gold coins.
Basically, there was a private offering previously where large amounts were sold to selected parties. What is being blocked is the public 'offering' where these tokens can be publicly traded.
The SEC is saying that Telegram Group is clearly offering a security, and thus is subject to regulation. Indeed, what Telegram is doing is significantly different from 'classic' crypto issuance a la Bitcoin. There was no company or legal entity responsible for Bitcoin, let alone one that could control the network while profiting off of it. They have similar opportunities for the sort of financial malfeasance that the SEC is designed to mitigate.
Personally, I find it extremely difficult to argue with the SEC's position.
I strongly support cryptocurrencies, namely Bitcoin, but also recognize that these pre-mine coins are entirely different on many levels. They are hilariously vulnerable to abuse, only just rising beyond the level of an outright scam.