Kin Ecosystem is alive and well, according to its general manager, Alex Frenkel. That’s despite the Securities and Exchange Commission lawsuit against Kik Interactive, the company which created Kin. The SEC claims the Canada-based messaging app sold unregistered securities to U.S. investors during its 2017 ICO. The complaint stopped short of alleging that the Kin token—which is governed by Kin Ecosystem—is a security.
That regulators were able to distinguish Kin from Kik was cheered by the latter organization.
“The SEC chose not to name the Kin Foundation or assert any claims based on Kin transactions occurring after Kik’s 2017 pre-sale and token distribution event,” said Kik’s general counsel, Eileen Lyon, in a press release back in June. “In our view, the SEC’s decision not to bring such claims acknowledges that the transactions currently taking place within the Kin Ecosystem do not fall under the federal securities laws.”
Frenkel further distanced Kin from Kik. “Kin Ecosystem is a separate entity from Kik,” he said. “Kik is only one of the partners in the ecosystem, we have others besides Kik, some with even a bigger user base. Tapatalk is one example. They are working on the messenger and integrating Kin inside. We are working only on Kin—building the blockchain, the tools and incentives for developers and partners to join.”
He added, “There are currently more than 50 apps that integrate Kin, including Unity, which we released the plug in for about a month ago. There is a game developer program and almost a dozen games built with Unity engine that have integrated with Kin. We’re announcing more in the pipeline over the next few weeks.”
To illustrate developer activity, Frenkel sent this graphic of the Kin Ecosystem with stats showing 58 monthly active apps, 458,000 monthly active spenders, $1.3 million total unique spenders, and $7.6 million total unique earners.
It should be noted, however, that data company Coin Metrics strongly disputes Kin’s numbers.
I asked Frenkel how Kik ended up in this mess.
Frenkel explained, “Kik was a very successful online messenger platform with 300 million users, but you need billions of users to compete on an ad-based model. That was Kik’s pain and why Kin was initiated.”
“Kik’s ICO was one of the most public ones,” he continued. “We were a mainstream company with hundreds of millions of users, a very strong brand, and major investors including Union Square Ventures and Tencent. The company reached a $1 billion valuation in its last round and was the biggest brand to do an ICO before Telegram. That caused a lot of attention. I think the SEC found themselves in a very challenging situation with many ICOs being terrible frauds and had to do something. Initially they went after the scammy ones and tried to close them down, and then they tried to settle with other projects where it was clear that the token was not used by anyone, and they got a few settlements, and I think they wanted a similar settlement with Kik.”
“But with Kik and Kin, it’s very, very different. We literally have millions of users using Kin and have been building both the blockchain and the tools, the SDK, over time, and we see the growth, traction and adoption. We went public with the discussions around the SEC and the need for clarity. There is this constant fear that one day someone from the SEC will come and say know what you did a year ago, two years ago? Now we think it’s not okay. We need this clarity to allow innovation to exist.”
Frenkel related how Kik has enlisted the help of the Blockchain Association, a Washington DC-based non-profit advocacy group formed in 2018 by Coinbase, CoinList, Circle, Inter/stellar, Polychain Capital, and other crypto leaders.
“As of June 28, the Blockchain Association is taking over DefendCrypto. Kik and many other companies built this movement. Blockchain Association will be pushing this effort forward for regulatory clarity for the entire industry.”
Some of the more vocal supporters of DefendCrypto include Kik investor Fred Wilson of Union Square Ventures who wrote in a blog post, “Many of the ones that are being investigated by the SEC are serious projects, started by some of the top cryptographers and computer scientists in the world, and backed by the leading token funds and venture capital firms… It is my hope, and Kin’s hope that DefendCrypto will be an inspiration for the many other important crypto projects that are silently battling with the SEC.”
Perhaps their strategy is strength in numbers. If Kik is effective in stemming the tide of crypto startups caving into settlement with the SEC, that might force the SEC to make decisions on how to handle tokens that were issued by ICOs that are now deemed unregistered security offerings.
Even if you lose, you win
I asked Frenkel what effect it might have on Kin if Kik loses and needs to disgorge all ill-gotten gains. He replied, “I’m not a lawyer but the conversation is not around is Kin, rather the conversation is around the sale to U.S. participants. Looking at past settlements, people in the U.S. who participated got an option to ask for their money back.”
“If you look at the numbers, you’ll see us growing and not in a linear way,” he added. “It’s been accelerating. More partners are joining, more developers integrating. I’m excited. We’re almost 70 people in Tel Aviv working on the tools and the blockchain itself. Things are not only as usual but the momentum is positive.”
The timing might just be in Kin’s favor. In the past few months, there have been several high profile announcements in the tokenization of social networks, and that alone could be driving developer interest.
On June 18, Facebook announced their intention to use the Libra token to facilitate transactions among its 2.7 billion users. To develop this token, they formed a consortium called the Libra Association with some of the world’s largest brands including Visa, Mastercard, Paypal, Uber, Lyft and Spotify.
Then on July 11, streaming platform YouNow announced it would begin using the Props token following the SEC’s expedited approval of its Reg A+ offering.
In the end, the compliant path might just prove to be what was needed for mass adoption and just possibly, all boats will float.