Uhh, what? I've always considered Kraken to be the most rules-abiding exchange - more so than Coinbase. They're quite shrewd in what they're willing to list.
I wonder if SEC is charging Coinbase soon, too?
I wonder if SEC is charging Coinbase soon, too?
They offer many cryptocurrencies.
The SEC has indicated that it considers most, probably all, cryptocurrencies to a be securities.
The writing has been on the wall for a while -- Coinbase got a Wells letter, basically a "lawsuit is coming" warning, months ago.
It's still not super clear to me why he says Bitcoin is not a security, but that Ethereum would be a security. I'm fine with whatever ruling as long as I can understand how it's being applied. I feel pretty good about considering stable coins securities. I'm less certain about NFTs since there is receipt of a (semi)tangible product.
I wonder if the recent introduction of ordinals to Bitcoin will result in his opinion on BTC shifting soon, too?
That said, none of what we're talking about addresses the fact that, in 2018, Gensler said, quote, "Bitcoin. Ether. Litecoin. Bitcoin Cash. Why did I name those four? They’re not securities."
Since then, things have changed, and now Gensler only highlights BTC as not a security.
If the inflection point was various teams speaking publicly about their usage of funds, and those talking points shifted Gensler's opinion, then OK, but I am not aware of an official moment when his sentiment shifted. As another commenter highlights, it could also be the transition to POS for Ethereum, but, again, I am not aware of Gensler highlighting the transition as the inflection point and this rationale fails to explain LTC and BCH.
To me, it feels like chasing opinion and public sentiment - not following rigid, established legal patterns.
https://www.forbes.com/sites/jasonbrett/2023/10/01/sec-chair...
I feel we're getting a bit into the weeds, though.
Is your stance that Bitcoin is a security and that remarks made two months ago by the Chairperson of the SEC are misguided?
Or is it that Bitcoin is not a security, but Ethereum is? If so, is that for technical reasons or just due to how it's discussed and marketed?
vSeeds.emplace_back("seed.bitcoin.sipa.be."); // Pieter Wuille, only supports x1, x5, x9, and xd
vSeeds.emplace_back("dnsseed.bluematt.me."); // Matt Corallo, only supports x9
vSeeds.emplace_back("dnsseed.bitcoin.dashjr.org."); // Luke Dashjr
vSeeds.emplace_back("seed.bitcoinstats.com."); // Christian Decker, supports x1 - xf
vSeeds.emplace_back("seed.bitcoin.jonasschnelli.ch."); // Jonas Schnelli, only supports x1, x5, x9, and xd
vSeeds.emplace_back("seed.btc.petertodd.org."); // Peter Todd, only supports x1, x5, x9, and xd
vSeeds.emplace_back("seed.bitcoin.sprovoost.nl."); // Sjors Provoost
vSeeds.emplace_back("dnsseed.emzy.de."); // Stephan Oeste
vSeeds.emplace_back("seed.bitcoin.wiz.biz."); // Jason MauriceBtw, I couldn't find these on the newest version, so I'm not sure how they do it now.
There's a staggering amount of illegal mining that is never accounted for in the economic models used to determine how much control these folks have over liquidity; this entire conversation is just broadly discouraged and for whatever reason seems to have attracted very little interest even from the crypto critics out there.
The number one weapon the crypto cartel uses to shut down dangwrous critical turns developing in the story, is their ability to move the last trade price almost at will, completely opposed to any building critical narrative in order to undermine it, knowing full well that the sympathy of the media reliably lies with "number go up", not "number made up." And they can do this because they're sitting on an enormous warchest of unsold coins mined when prices were far cheaper, which they can use to fund their operations while they throttle back current coinbase sales at current prices to prop up the price.
> illegal mining
What exactly is "illegal mining"?
2023: (much smaller scale than above but still stealing over USD $150000 a year in electricity)
https://www.bangkokpost.com/thailand/general/2569745/crypto-...
This time around the authorities estimate that they've only found 1%, not 10% as they had before, of the illegal mining done in their country.
That's not exactly "staggering" or significant in the context of the Bitcoin network. Unlikely that such operations have any meaningful control over the network or liquidity, even if it's just 1% of what's known.
You seem to think that these sorts of operations are somehow connected in a large coordinated cartel the controls the industry, but given that they're illegal, isn't it far more likely that these "black market" operators are fairly small by comparison to the legitimate players in the US?
The mining ban in China a couple of years back gave us a pretty good indication of the size of the legitimate industry in that country, and it absolutely DWARFS the biggest of the illegal examples you gave.
Interesting way to word it too, "illegal mining". They're just stealing electricity. If they used that stolen electricity for heating, you wouldn't call it "illegal heating", would you?
It's been happening ever since crypto mining, especially Bitcoin, existed. Long before most anyone knew what mining was, or knew to look for it being done stealrhily on someone elses's dollar ...or baht. I didn't say I condone stealing electricity for any purpose, but there's a particular hypocrisy with crypto people who claim that mining costs chase the hash rate and difficulty adjustments ensure that everyone has a fair shot at winning a coin base. Obvious nonsense.
It's hypocrisy that crypto people, who like to think of themselves as some sort of sophisticated financial visiinary class, are so hopelessly naive that it would never even occur to them to consider that being rationally self interested will inevitably and swiftly devolve into outright theft, and the obfuscated consolidation of power favors the venal corrupt and those who are willing to benefit from wholesale theft, which is why such people are entrenched at the center of this so-called decentralized system.
the papers studying the amount of black market activity in Bitcoin have consistently shown Bitcoin to be cleaner than the economies in virtually every country on the planet, except for the occasional ultra-clean tiny european state.
literally every bitcoiner since the first roll-out of the Silk Road and the resulting senatorial attacks on them, have been ultra-interested in exactly how much of their hobby is black market and how much is criminality. literally every single one of them is heavily invested in knowing more about the nature and extent of bitcoin criminality. to say that it didn't occur to them that self-interested criminals are operating in BitcoinLand is .. stupid.
I think there is lots of manipulation, but could you elaborate on how you can, for example, pump the BTC price up when you hold lots of BTC, but no USD? Leveraged futures on crypto-only exchanges?
This is not even getting into the circus known as tether, which I believe is a significant factor but actually quite a bit of an over-stated red herring serving (along with constant exchange clownery) as a distraction away from the much bigger influence that is the enormous subjective control miners have over the order book price of the coin.
The protocol development happens through BIPs (Bitcoin improvement proposals): https://github.com/bitcoin/bips
BIPs are discussed for years, before (and if) they are implemented, and basically everyone needs to agree on them, because no one wants to fork the blockchain, which could be devastating.
Sources:
https://github.com/orgs/bitcoin/people
https://bitcoin.stackexchange.com/questions/35907/bitcoin-no...
The sentiment is an integral part of the established legal pattern - the Howey test is about "expectation of profit".
Even if based purely on vibes, I think the man on the Clapham omnibus might well say: someone buying Bitcoin today, or Ethereum in 2018, is not expecting to profit from the efforts of their respective dev team, whereas someone buying Ethereum today is expecting to profit from the efforts of their dev team. (I mean, I didn't even know Bitcoin still had a dev team - isn't it basically "finished" at this point, and has been for years?)
At this point Ethereum doesn't really have "a dev team." There are about ten independent client teams, who have public meetings to come to agreement on upgrades, plus an open research community.
When you say that an ETH buyer is "expecting to profit from the efforts of the dev team" which wasn't the case in 2018, are you talking about proof of stake? Because it's not all that different from proof of work. You run a client, process transactions, and get rewarded for doing that. Instead of buying a server rack you stake some ETH, but what you get rewarded for is running the protocol.
You don't get rewarded for just holding ETH. Unless the value of ETH goes up, but that's the same with Bitcoin and with Ethereum in 2018.
The Howey test, incidentally, is also about an investment contract. That's why an equity is a security, but a bar of gold is not, even if you bought the gold as an investment. Lack of contract is why the SEC lost their case against Ripple recently.
Not proof of stake qua proof of stake, but the fact that substantial changes to ethereum (like proof of stake) - things that change the usability of the network, and so could be reasonably expected to change the value of ethereum tokens - are still being worked on.
> The Howey test, incidentally, is also about an investment contract.
No, it's the definition of an investment contract. If it included whether something was an investment contract that would be circular.
> That's why an equity is a security, but a bar of gold is not, even if you bought the gold as an investment.
No, the reason gold isn't a security is there's no common enterprise and, more importantly, no efforts of others. You might buy it as an investment, but the investment isn't because you think the gold devs are going to add new features that make gold more useful.
> Lack of contract is why the SEC lost their case against Ripple recently.
Whatever you think about Ripple or cryptocurrency in general, that ruling was just utterly bizarre. You can make reasonable arguments for why these things aren't securities (even if I don't agree with you) but that judgement wasn't it. It's not a precedent for anything, it's just crazy.
With proof of stake, a staker eventually gets an opportunity to follow the validation rules and put some transactions in a block. If they don't properly follow the rules, they will get slashed. If they don't submit a block when it is their turn, they will get gently slashed.
In proof of work it is a free-for-all with whoever has the most hashing power winning block submission more frequently. If they submit a block that doesn't follow the validation rules they keep all of their (physical silicon) hashing power and the block is ignored.
Take that further to airline points and Chipotle points. If the stablecoin does not provide returns to the holder, how is it an investment contract?
No-one is holding those with an "expectation of profit". Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.
Coinbase, who co-founded USDC, absolutely pays interest on USDC: https://www.coinbase.com/usdc
(they call it rewards instead of interest in an attempt to avoid regulation, but it is functionally the same thing)
> Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.
Stablecoins are very frequently used as transfer tokens for remittances, wages and ecommerce. We pay overseas staff in USDC for example (it's quicker and easier than bank transfers).
Regardless, that's not why people hold stable coins.
The SEC’s first strategy was to go after the companies creating the crypto. Most that are targeted settled and exchanges delisted those crypto assets that were ruled to be securities - registered or not - then the SEC went after well funded, more professional and less risk averse ones and have been losing in court.
So this is a war of attrition so the SEC then just went with blanket statements and goes after the exchanges, without telling them which ones are securities. The SEC also has not been winning at this second strategy.
All anybody has been asking is for the SEC to tell them the difference between the assets. How can a crypto asset be issued compliantly as only a product, and when does it transition into not being a security if so?
The SEC has fumbled over its words as if trained on 10 years of HN crypto comments, and the courts say its arbitrary and capracious.
So the SEC just claiming they are isn’t going to win any court. Their goal is really to drain funds and get companies to settle. Because the SEC isn’t supposed to determine what is a security
they lose because they cant articulate when they are securities and when they're not securities
their theory does play into a trap you pointed out, in that there are plenty of non crypto products that function the same way - limited supply runs sold by corporate issuer where a ton of speculator collectors hope the price goes up based on the actions of the issuer - that the SEC never bothered with. Either they're all securities or none of them are. The SEC has been asked to explain the difference and fails. People on this forum played devils advocate on a supposed legal difference just because they dont like crypto, but their arbiter - the SEC - fails to find those points strong enough to argue its position at all! the courts and the senate are like “wait, you don’t have an argument at all? good lord”
but like an abusive spouse it just keeps circling over the same word salad of “you’re supposed to know what I want, its been sufficiently clear the entire time” instead of articulating themselves using their words, to the shock of the couples counselor who already had a bias towards the spouse but can’t come up with anything to help their ridiculous case
You can read the act yourself, a cryptocurrency (depending on the type) is not a security by the definition provided. Nor does the cryptographic token have an issuer. Quite literally, most crypto has none of what’s defined under the SEC scope.
That said, sure _some_ of the crypto tokens would could count as securities. But even then it’s not clear the exchanges should be the ones being targeted.
Funny, that describes virtually every cryptocurrency token I'm aware of.
But for all practical purposes, you shouldn't be looking at the definition in the law itself, you should be looking at the case law behind it, where of course the ruling test is the Howey test... "an investment of money in a common enterprise with a reasonable expectation of profit derived from the efforts of others."
Your interpretation is far removed from reality but I appreciate the enthusiasm
the act regulates the nature of a specific transaction and therefore does not need a description of the asset itself. It never needed to imagine crypto, or fungible orange groves as the howey test was about, or anything.
The SEC will argue they just enforce the law and aren't required to tell them how to comply. Buuut they are professionally obligated to tell them, especially when the law is so ambiguous. It's obvious the SEC is being a bully, so the judiciary and public will hopefully side with Kraken.
This is correct.
> Buuut they are professionally obligated to tell them,
No, they aren't.
> especially when the law is so ambiguous.
If the law is actually vague that's not an argument SEC has to tell them how to comply, its an argument that the law is unenforceable.
If its not actually vague, then the government isn't obligated to tell them how to comply other than with the law (including statute and regulation.)
Non-Security Deposits are interest-bearing products that are not securities.
Non-Security Deposits: CD Certificates of Deposit, MMA Money Market Accounts, Treasury Bills, Savings accounts, Checking Accounts
Do banks require SEC registration to offer interest-bearing Non-Security Deposit products?
Have banks ever been required to qualify interest-bearing products as securities contracts, after qualifying each product for list in each US State of operation?
This also is about unregistered securities and not interest bearing accounts although that too is an issue because they're not banks.
edit: They're Money Services Businesses and that's it. They might have some state-level lending licenses but I'm fuzzy on that.
> The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks.
https://www.sifma.org/resources/general/firms-guide-to-the-c.... :
> Any broker-dealer that is a member of a national securities exchange or Financial Industry Regulatory Authority (FINRA) and handles orders must report to CAT. Eligible securities include NMS stocks, listed options, and over-the-counter (OTC) equity securities.
Interledger Protocol works with any type of ledger, has a defined messaging spec, and has multi-hop audit trails: https://westurner.github.io/hnlog/#comment-36503888
> Do banks require SEC registration to offer interest-bearing Non-Security Deposit products?
No, because they are registered and regulated as banks.
[1] https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...
In 1999, GLBA [2] changed the 1933 Glass-Steagall rule [3] that had prevented banks from investing Savings deposits in order to ensure that they would have enough to prevent another run. (As depicted in "It's a Wonderful Life" (1946); Clarence the angel or Mr. Potter's Potterville)
I'm not sure that it's anywhere explicitly stated that the banks' socialist FDIC corporation justified allowing investing of savings deposits. They created a large shared prepaid credit line for themselves in order to operate safely.
Banks invest in non-securities; without any agreement for future performance.
Banks invest in treasuries, which are tokenizable non-security deposits.
(Some time later, the dotcom boom busted and the US went to war/oil/defense instead of clean energy (like the solar panels that were on the roof until 1980 (due to the oil crisis CPI hostage situation, when it became necessary to defensively meddle in the ME with blowback left for Obama to handle, and not pay for)))
[2] https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...
[3] https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legisla...
https://help.coinbase.com/en/coinbase/other-topics/other/cli... :
> How is client cash stored at Coinbase? The vast majority of Coinbase client cash is stored in FDIC-insured bank accounts and U.S. government money market funds to keep it safe and liquid. Like all assets on Coinbase, we hold client cash 1:1 and your assets are your assets.
https://support.kraken.com/hc/en-us/articles/360001372126-Ar... :
> Are balances stored on Kraken insured? Cryptocurrency exchanges do not qualify for deposit insurance programs because exchanges are not savings institutions. Exchanges are not even meant to be cryptocurrency wallets.
https://www.investopedia.com/kraken-vs-coinbase-5120700 says that Kraken ended staking services in the US in February 2023.
There is yet no FDIC protection for any stablecoin, and yet no CBDC (just FedNow), but US banks are specifically allowed to provide crypto custody services.
Already happened. [1][2]
Let me explain the difference..
I had a series 63 license from The SEC. Here is what I submitted: 1. Background info form to FBI which was checked. 2. Fingerprint form
Far different when you register a company as public.
Per their own docs they review accounting not background, see
Of course, this was my first time aiding in the effort for taking a company public, so I'm not exactly a well seasoned veteran and there is a lot that I do not know. But based on what we had to provide to the SEC, I do not believe that it is strictly true that the road to publicly traded is only gated by an accounting review.
This is all about disclosure, nothing at all with business function.
I'm sure there's some math behind calculating certain values for disclosure, super important. The importance of this is because the numbers have to reflect reality for the purposes of proper disclosure.
Disclosure.
If your business is to rob trains, not the SEC's business. So long as you disclose your finances you can sell shares of your train robbing business. The criminal conspiracy charges you'll face will have nothing to do with the SEC and everything to do with your state government or the FBI if you messed with interstate commerce.
Like do you really believe that if you filed an S-1 with the SEC that said "we raise money from investors and use the proceeds to pay distributions to previous investors" that the SEC would say "sure, whatever, go ahead and IPO your ponzi scheme. We don't review background." Because I sure don't.
https://www.bloomberg.com/opinion/articles/2023-03-23/the-se... | https://archive.today/RX8aj ("The SEC Is Coming for Coinbase")
but in my opinion that's just plain stupid, it's like inviting you to my home they I can not stop you from stealing something, because that's not my thing to enforce
https://news.ycombinator.com/item?id=36212120 ("US SEC sues Coinbase, one day after suing Binance")
(To be clear, neither Coinbase nor Kraken were criminally charged. The phraseology "SEC charges" is a loaded, potentially misleading, one).