[edit] I should say, Coinbase has been preparing for this forever. They acquired a broker-dealer license years ago, back in 2018. [1]
[1]: https://cryptoslate.com/sec-chair-gensler-confirms-everythin...
1. Bitcoin was classified as “currency” by Clayton.
2. It’s the closest to being decentralized so no “organization will benefit from the work of others”.
3. Growth of Bitcoin wasn’t initially speculative but as a use of currency, which is different from whatever token you fork as its goal would be for speculative trading, failing the Howey test.
https://www.coindesk.com/markets/2019/03/12/sec-chair-clayto...
This creates a regulatory risk, and is one reason for owning BTC instead of ETH. Note I own a few ETH and 0 BTC, and ETH has dropped 10% compared against BTC recently (normally they seem to be highly correlated (even long-term) which implies to me that the market is somewhat driven by generic crypto sector investing).
Edit: Coinbase’s argument that their staking service is not a security: https://www.coinbase.com/blog/coinbases-staking-services-are...
I doubt this claim with extreme prejudice.
Dogecoin is arguably in the same category as Bitcoin. So forks don't have to be securities. They do have to be actually decentralized, as in one entity does not decide which fork is the true fork (like with Ethereum, Bitcoin Satoshi Vision, etc).
https://blog.ethereum.org/2014/07/22/launching-the-ether-sal...
Staking and maybe EIP-1559 could change things?
It's sad since it seems like Coinbase is now directly collaborating with Ethereum developers https://eips.ethereum.org/EIPS/eip-3651
> The COINBASE address shall be warm at the start of transaction execution, in accordance with the actual cost of reading that account. > The COINBASE address should also be always be loaded because it receives the block reward and the transaction fees.
Looks like Coinbase currently makes up 10% of Eth staking. Would this give special privileges to Coinbase over other exchanges?
I'm not sure if ETH was completely in the clear even with this approach. Vitalik and other founders seemed to have created expectations of profit in their ICO presentations to US investors in a few 2014 videos.
No.
I mean you can say whatever you want but if it quacks like a duck it’s still a security, if you don’t mind my mixed metaphor lol
>Why is Bitcoin not a security but if I fork Bitcoin it is a security?
You are right. Gensler was either misquoted or mispoke.
If somebody forks Bitcoin, distributes the majority of coins for free and renounces control; then random people (not connected to the founder) start voluntarily improving and giving it value, it probably wouldnt be a security.
Besides being the first, there aren’t really any structural differences for the functionality or the development and marketing of BTC than other coins.
The only sufficient argument I see is the naivety around the distribution method which implies a metric of decentralization. To me that implies other coins should not be considered securities if they pass some decentralized metric threshold.
Now I’m also of the radical opinion that securities are actually a type of token (tokens being a general class of financial instruments like coins, securities, currency, or any asset) - not the other way around, and the law needs to be rewritten to accommodate this.
Bitcoin struggled for years to get a change adopted that most of the community thought was a good one, because nobody, not even Satoshi if they are still around, could change it.
The point is that the community/network/whatever that formed around bitcoin isn't centralized, so even for relatively "tame" changes like taproot, nobody could agree and it took years to merge regardless of technical merit. For better or worse and for a wide number of reasons I can speculate about, the equivalent social structure around Ethereum is far more centralized around the will of Vitalik and a handful of others, and they've demonstrated repeatedly (except around the ETC debacle which has mostly fizzled) that they can get the whole network to adopt even fairly complex and risky changes. Monero regularly forks, and even though it doesn't have a formalized leadership structure, is able to get changes rolled out. Same with ZEC and the electric coin company. Be it a single person, a pseudonym, an organization, or whatever, everything but bitcoin has forked repeatedly, which indicates a degree of central control (and thus central benefit, from the POV of regulators). In most cases outside of bitcoin, the founders have also enriched themselves enormously by remaining in control.
Contrast with the attempted forks of bitcoin: BCH was a huge mess and has been slowly fizzling out for years. BSV is a joke. Yes you could create a new fork today, but the whole point is that the difference isn't technical, it's a network. The network is partially technical (there are still lots of miners that won't mine your new fork) but is also cultural, and bitcoin users/miners/exchanges don't look up to the "dev team" as an authority. That's the key difference IMO. If you just focused on the technical you'd still be arguing that betamax was a better format.
Difficulty bombs. https://twitter.com/level39/status/1554174864600227843
The presale.
Edit: the context of this is the question of whether Ethereum is a security. The SEC has already ruled that it is, and the ruling came down to the fact that it had a presale (via the Howey test).
Some argue otherwise. That will need to be determined in the courts or congress, not by a regulatory bully.
The SEC was set up by congress, the Securities Act of 1933 and the Securities Exchange Act of 1934 and several others [1]. The Howey test was made by the courts and at least finalized by the supreme court [2].
[1] https://www.sec.gov/about/about-securities-laws
[2] https://caselaw.findlaw.com/us-supreme-court/328/293.html
You argued that "courts or congress" should determine whether Ethereum meets the bar for being a security. My links point out that the the courts and congress has already put a process in place, as you seem to be requesting in your your comment:
> That will need to be determined in the courts or congress...
It sounds like you have additional complaints/issues about the SEC outside of those you put in your comment. My reply was not to address SEC as a whole, only that the "courts or congress" are the wellspring for the procedures and processes currently in place like you seemed to request.
On what legal basis do you insist that the differentiation must be by inclusion of a “mechanism”?
The way we tend to judge whether things fit into legal categories is by the criteria specified in the controlling law (including relevant statutes, administrative regulations, and case law.)
While cryptocurrency enthusiasts are fond of an approach where the mechanism is all that is relevant, mechanisms may be all, part, or none of what is relevant in law. While only tangentially relevant here, an amusing example in securities law is what something is commonly called can be relevant, even decisive, because the definition of a ‘security’ in statute includes (but is not limited to) ‘any interest or instrument commonly known as a “security”’. 15 U.S. Code § 77b(a)(1)
I don't agree with the thrust of the argument either, but I think it's a genuine assertion and not begging the question.
> Now I’m also of the radical opinion that securities are actually a type of token (tokens being a general class of financial instruments like coins, securities, currency, or any asset) - not the other way around, and the law needs to be rewritten to accommodate this.
I broadly agree with this view! However, I think the law is better suited to get out of the way and gracefully allow the inevitable separation of token and state.
a product can simultaneously be a security, and many organizations in the collectibles market go out of their way to avoid that, organizations that sell physical goods with perceived scarcity and a vibrant aftermarket. within the crypto space, creators of digital assets go out of their way to avoid it too, and in this regard, I've never been surprised at any specific SEC enforcement action against any crypto team. The ones that behave one way, so far have not been sanctioned, the ones that behave another way have been. Its not arbitrary, but it does still leave uncertainty.
but where we are now, where the SEC pretends like "every digital asset is a security and we just haven't gotten to it yet", what we're left with are the behavior of the purchasers of digital assets. they buy tokens with the expectation of profit and rely on the issuing team to realize that. theoretically that logic could make anything a security, are sneakerheads trading nike-themed securities just because they're getting into it to make a profit?
at this point, I would be inclined to agree only if nike has to register their artificial scarcity shoe lines as securities and can only sell them to accredited investors. otherwise, the logic fails and a different capital markets structure needs to be considered.