You're right, but some people seem to think cryptocurrency is magically exempt from securities laws because they really want them to be.
Also I would classify ethereum as a security, because they created a token offering initially. After it was launched it was mined, but I understand majority was sold in the initial coin offering.
Pyramid scheme? Do you even know what does it mean? If Bitcoin is pyramid scheme, so are many others things like stocks, currencies etc.
Currency - a state-backed value in which government salaries and bills are paid and in which you pay your taxes
BTC - a somewhat decentralised ledger where most coins are held by a very low number of people and where some of the early folks made massive amounts of money. Not backed out exchangeable by/for anything, with value purely coming from someone else being there to buy it. Great for dissidents, tax evaders and anything illegal - but not really any other case for its existence except among those with a radical distrust in government.
Currency - you said "state-backed" - backed by what? Forcing it's use by demanding taxes and paying salaries/bills is not "backed".
BTC: "most coins are held by a very low number of people" - can you prove it? Consider that keys to many old account are probably lost.
"Not backed out exchangeable by/for anything" - neither are most/all currencies. Even commodities like gold sell by much higher price that is "backed" by usage of these in industry.
"value purely coming from someone else being there to buy it" - there is some value in being able to transmit/store value
"Great for dissidents, tax evaders and anything illegal" - I would actually say cryptocurrencies are awful for these applications: there are little places where you can pay with them and many will require verifications (and will report significant transfers). Bitcoin blockchain is public allowing tracking of transaction. On the other hand, cash? Accepted anywhere, non-trackable and people are already experienced in money laundering.
"but not really any other case for its existence except among those with a radical distrust in government" - distrust in government seems to be just healthy at the moment (for example, see civil forfeiture and Snowden).
Cryptocurrencies exist to move money out of China by circumventing their currency controls (pay miners in RMB locally, get crypto, send it to Hong Kong, exchange into USD). ICOs are a byproduct of that process and exist merely for scam.
Again, i am not against scam. Scam is fine as long as you aren't getting caught - nearly everything in software in scam directly or indirectly. It's just trying to do scam in the open and getting surprising it's hard is what crosses my mental limits of acceptable chutzpah.
People want to use ICOs like they use Kickstarter: to fund a consumptive purchase. Digital assets have the capability of being consumptive. There isnt an obvious way to tell them apart, especially when there is a limited supply and exchange of money. People want there to be an easy way to distinguish business models and assets. So thats where experimenting with different legal theories helps.
Well when the law gets changed that's exactly why and how it gets changed
Last year, Wyoming has recategorized crypto assets into their own asset classes that is exempts them from state level securities law and others. Because it was obvious to the legislature and governor there that debating commodities, currency or securities status was ignorant.
This year, Montana representatives have also reached the same conclusion.
This year, Colorado's representatives have also reached the same conclusion.
US Congress has a bill in committee mirroring these. It isn't a priority for the House as you might imagine. Holistic US re-imagining of these assets isn't relevant until the Federal legislature reaches consensus.
A week ago Liechtenstein's legislature unanimously reached the same conclusion, which inherits limited consensus amongst all European Union/EEA/EFTA member states.
So yes, people seem to think cryptocurrency is magically exempt from securities laws except the securities regulators that do not mirror the will of the people and are being steered by their legislatures, as designed. Courts lack latitude to lean any other way as well, until the legislature changes the law, which is happening.
The test is quite simple: * It's an investment of money * There is an expectation of profits from the investment * The investment is in a common enterprise * Any profit comes from the efforts of the one offering the investment or a third party
Cryptocurrency trading in general could be either but ICOs are clearly in the security category.
I would be curious to see Wyoming etc. try to overturn Supreme Court's decision on SEC vs. Howey. If they are successful it will be the end of SEC and the public markets in the US as we know them.
Re: Liechtenstein. They don't have a stock exchange so they don't have anything to lose.
The law in Congress will tell the SEC to stop wasting time on this and give a default status for digital asset issuers to exist in that isnt securities. Exactly as a handful of states have done.
Things that are actually securities in liechtenstein are passportable to other European countries that do have stock exchanges.
I think that was a very reductive and inaccurate comment on a multifaceted topic
Your response: "Digital asset exchanges and issuers already exist in Liechtenstein."
Why do you conflate the two? Is it intentional or due to lack of understanding? L. is trying to make money on ICOs because it does not have anything to lose with regular financial markets.
> I think that was a very reductive and inaccurate comment on a multifaceted topic
And I think that was an attempt to intentionally complicate a simple topic.
Crypto can be used as an investment in a form of an ICOs and that should be registered.
It can also be used as a currency instrument for (mostly illegal) transactions. When used as such it does not need to be registered.
You’re right in that they don't have one and have little to lose by creating digital securities and digital assets clarity.
Liechtenstein’s law isn't only about cashing in on ICOs. It covers digital securities as well, which Europe’s other securities exchanges are not equipped to handle.
There is only upside for them to provide a clear framework for digital securities and digital assets, making it easier for an issuer to choose and regulatory clarity for all participants
We speaking the same language yet?
L's population is around 35 thousand. It's like City Council of Menlo Park CA gaining a status of a sovereign state and then making venture capitalists from Sand Hill Road exempt from SEC rules. L is trying to make a buck by being more permissive because they have nothing to lose otherwise.
> We speaking the same language yet?
I suppose we do. English that is :)
Its nice to see people applying themselves very well
Yes its like if Menlo Park was sovereign but also had economic unions negotiated with DC and the rest of North America, you would find that very convenient
If you are in the business of offering furtive financial services it makes total sense to stay abreast with the times and add crypto to the portfolio. It's a great instrument for both money laundering and tax evasion.
some of the largest public companies and hedge funds are incorporated in cayman islands. the obvious rebuttal would be that they too are vehicles for money laundering and tax evasion, but also everything else because the point is that you can't distinguish when a state doesn't use its resources demonizing transactions