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South Carolina AG fights against Genesis crypto creationism

American state issues sends cease and desist to Icelandic miner

Wade Hampton III’s statue outside South Carolina’s statehouse. Would be nicer to see Lionel Hampton’s statue (via Shutterstock).

The South Carolina Attorney General’s office sent a cease and desist letter to Genesis Mines for offering sales through its website within the state without a license. The state exercised its authority over the Icelandic cryptomining titan in court. The cease and desist named Genesis’ Swiss parterners Swiss Gold Global in Zurich and its Hong Kong parent company.

Instead of selling traditional shares or other securities, Genesis directly sells to users maintenance-free plans for a given amount of the network’s computing power as measured in thousand hashed per second (kilo hash per second or kH/s).  As of today, these shares are all “sold out” on the website:

Out of stock

Out of stock

Because of the cease and desist, Genesis is to suspend all business within the borders of South Carolina for not registering to do business in the state. Forty-seven of the 50 states set their own rules for monetary transmission. It is a huge barrier for small crypto startups who lack the staff and legal power to comply with the complex set of regulation.

Yet having this complex network of crypto-cops in the States means good news for blockchain fans. In fact, they emulate a blockchain themselves. In recent weeks, these state-level laws have been used to stymie or attempt to quash questionable crypto enterprises, such as the Steven Segal-backed and scammy sounding “Bitcoiin” ICO (yes, that extra “i” is in there on purpose) and the infamous Bitconnect scheme. In many cases, the lack of financial transparency is enough to sink these companies before they can float away with any investors’ money. State laws vary, but the proof-of-work generated just by complying can often show you a lot about the company. Some states require a listed compliance officer, a minimum amount of cash on hand in a listed bank account, and other safeguards before they can accept or transmit money.

As cryptocurrency expands in market value, the need for computing power expands as well. Cryptocurrency mining rigs would be unprofitable Stateside where the price per kilowatt hours fluctuates, driving up the cost of running the machines and cooling down their circuitry. “Our electric bill here is multiple millions of dollars per month,” Genesis CEO Marco Streng told CNN’s Beme News earlier this year.

Streng’s company offsets this cost by selling shares in a mining pool. The bigger the pool, the most profit can be shared. Until today, people in South Carolina—with hot summers and high electricity costs—could buy into this digital gold mine. But not anymore.

However, Genesis could theoretically close itself off from outside capital and run their machines directly from Marco Streng’s Logos Fund, which he also founded.

 

Brendan Sullivan is a writer, producer, and author of the memoir Rivington Was Ours: Lady Gaga, the Lower East Side, and the Prime of Our Lives. Disclosure: he owns cryptocurrencies. Follow him on Twitter.