The Research unit of crypto-focused FinTech firm, Circle, released a report on the implications of airdrops on the crypto-market and regulatory oversight.
Recently, Stellar announced the largest airdrop in its history. It announced a distribution of 2 billion XLM tokens to Keybase wallet users. The market primarily views this as a move to attain regulatory approval. However, even airdrops raise regulatory concerns of security. The report explained,
For instance, the U.S. SEC can still classify a token as a security based on its issuance or function within a network. If these tokens are then distributed in an unregistered manner that creates value for the issuer (like an airdrop), the event can qualify as an unlawful offering of securities.
Crypto-community has recently alleged Ripple of unloading their XRP tokens. The distribution statistics of XRP has often raised doubts of centralization. However, as reported on CoinGape earlier, the CEO of Ripple has denied all such claims. Nevertheless, Garlinghouse also eventually gave away some investors were getting XRP for “slightly cheaper” via investment contracts.
XRP is currently at its 18-month low looking for support at $0.25.
XLM has also lost significant value this year. The airdrop news seemed a negative impact on price. The price has dropped by about 7%. The price of XLM at 4: 15 hours UTC on 14th September 2019 is $0.0574.
Moreover, the increase in supply and selling pressures by airdrop holders adversely affect the price of the crypto. This makes the hodler less motivated to hold onto his coins. Hence, the efficacy of the airdrop in achieving distribution is lost if people continue to sell.
Furthermore, the report also drew analogies from the distribution of Bitcoin [BTC]. In the initial phases, as much as 5 Bitcoins were gifted to a website visitor. Recently, Domino’s in France also announced a giveaway of €100,000 worth of Bitcoins to a lucky customer to celebrate the Bitcoin pizza day. However, these are community-driven programs.
Nevertheless, an airdrop is a proven market and distribution strategy that could aid in the adoption of cryptocurrencies.
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