Unveiling the "US Compliance" Marketing Trap of Encryption Platforms

Recently, a platform called Mystonks, which focuses on "US stock on-chain," has sparked widespread controversy due to freezing users' funds. It is reported that the platform withheld a large amount of assets on the grounds of "non-compliance with the source of user funds."

From a financial compliance perspective, this handling method is extremely unusual. The standard practice for a regulated financial institution upon identifying suspicious funds is to refuse to accept them and return them along the same route, while also submitting a report to the regulatory authorities. The platform's direct "withholding" of assets inherently raises a huge question mark over its claimed "compliance."

The Mystonks platform has always used its possession of a U.S. MSB license and compliance to issue STOs as its core selling point. So, what is the truth behind these so-called "compliance" qualifications? The author conducted an investigation.

1. The Truth about "Compliance STO": Filing Does Not Equal Permission, Private Placement Does Not Equal Public Offering

During the exploration process, the author found that the promotion of Mystonks is not without basis. In the public database of the U.S. Securities and Exchange Commission (SEC), the filing information of the company Mystonks Holding LLC can indeed be found.

The key points of this document (Form D) are as follows:

● Filing Type: Private placement exemption based on Regulation D 506(c) rules.

● Issuance target: Only for "Accredited Investors".

● Issuance scale: 575,000 USD, with a minimum investment threshold of 50,000 USD.

This document is precisely where the problem lies and is also the most misleading aspect of the platform's promotion.

First, Form D is a notice filing, not a business license. It only represents that the company has informed the SEC of a private placement issuance, and the SEC only archives it, without representing any review or endorsement of the company's qualifications or the authenticity of the project.

Secondly, and most importantly, the filing strictly limits the issuance targets. Regulation D is an exemption provision designed for private placements, aimed at a small number of qualified wealthy individuals or institutional investors (i.e., "accredited investors"). However, Mystonks, as a publicly accessible trading platform, clearly has the vast majority of its users not meeting this standard.

Therefore, Mystonks' behavior can be understood as: holding a filing document limited to fundraising from a small number of wealthy individuals, and publicly engaging in securities trading activities that require strict licensing.

This practice essentially takes advantage of ordinary investors' unfamiliarity with U.S. securities regulations to create confusion of concepts. To legally offer securities token trading services to the public, the platform requires advanced licenses such as ATS (Alternative Trading System) or Broker-Dealer , which is worlds apart from a simple Form D filing.

2. Misused MSB License: "Anti-Money Laundering" Filing Unrelated to Fund Security

After discussing the relatively complex STO, let's take a look at the more common promotional tool - the US MSB license.

Regarding the MSB license, investors need to recognize a core fact: its value and significance have been seriously exaggerated by many project parties in the market.

The regulator of MSB (Money Service Business) is FinCEN, which is part of the U.S. Department of the Treasury, and its core responsibility is anti-money laundering (AML). In other words, FinCEN only cares whether the platform reports suspicious transactions as required to combat financial crime, but it is completely not responsible for ensuring the safety of users' funds, reviewing the platform's business model, or technical capabilities.

Moreover, the application threshold for MSB is extremely low. It can be easily registered overseas through intermediary institutions, and there is even no need to establish a physical office in the United States. This makes it the preferred tool for many projects to quickly and cost-effectively "package" their compliance image.

When a platform primarily serving non-U.S. users repeatedly emphasizes its MSB license, investors need to understand that this is more of a marketing strategy rather than proof of its strong financial strength.

Conclusion: Understanding the "Compliance" Tactics of a Certain Type of Platform from Mystonks

The case of Mystonks is not an isolated incident; it clearly reveals a type of platform that commonly employs "Compliance" packaging techniques in gray areas. Looking at the market, many exchanges and financial platforms are reusing similar scripts, and investors need to establish a clear awareness of this.

The typical tricks of this kind of platform can be summarized as:

1 Step One: Use the MSB license as a marketing "stepping stone." Leverage its "official U.S." background and very low acquisition costs to quickly establish a basic, seemingly reliable image.

2 Step Two: Interpret the securities filing using the method of "conceptual substitution". Package a limited filing document (such as private placement filing) with strict restrictions as a comprehensive business license that can provide services to the public, and use information asymmetry to conduct deep misguidance.

3 Step Three: Utilize regional and legal differences for "precision marketing." They are well aware that their business cannot take root in the United States, so they focus on overseas users who are unfamiliar with U.S. regulations, creating a situation where "the flowers bloom inside the wall, while the fragrance reaches outside."

As investors, we should learn lessons from these schemes. When assessing whether a platform is truly compliant, keep in mind two basic principles:

● True compliance is expensive and tangible. It entails high licensing application fees, deposits, physical office rent, and expenses for local legal teams. Those easily obtained, invisible "compliance" must inherently be of little value.

● True compliance is transparent and specific. It dares to clearly disclose its license types, numbers, regulatory scope, and limitations. Any vague or broad statements of "compliance" often cannot withstand scrutiny.

In investment decisions, please restore the term "Compliance" from a marketing vocabulary to a legal fact that needs to be strictly examined. By adhering to this bottom line, we can maximize the protection of our asset security.

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