This is going to put a dent into the classic Bitcoin exchange business models of "claim we were hacked", "front run the customers", and "speculate with the funds on deposit".
Money transmitter regulation at state level already enforce the first and third. Money transmitters must retain and account for all customer funds on deposit. That is why I won't put any money into an exchange that avoids states that regulate exchanges as money transmitters (looking at you, Kraken).
I really wish the SEC or FinRA would supercede the state level money transmitter regulations. It makes little sense for a money transmitter that transmits money across state borders to be regulated by the whims of both states instead of the government that has regulation of interstate commerce as part of its constitution. And it would give regulatory evaders like Kraken an all or nothing choice instead of their current practice of only doing business where there's no regulation.
Except, most of the major exchanges are registered in places like Seychelles or the British Virgin Islands as shell corporations.
Bitfinex and Bitmex are two of the largest exchanges and it certainly seems like there's frequent incredibly shady activity with frequent large flash crashes presumably as insider trading to liquidate margin calls and/or stop loss orders.
>Except, most of the major exchanges are registered in places like Seychelles or the British Virgin Islands as shell corporations.
I don't think this is true. Apart from Bitmex, I'm not aware of other major exchanges being registered there. Bitstamp (Europe), Coinbase (US), Kraken (US), Bitfinex (HK), Binance (HK?).
Yes, I've only heard Coinbase/GDAX and Gemini are the only fully regulated and audited US based exchanges which have qualified for the New york BitLicense.
Yup, we'll probably be stuck with only 2-4 exchanges that are able to afford the regulatory burden and then the regulators will claim a victory for "helping the little guy."
As a "little guy" who lost a lot of USD and Bitcoin in the MtGox fiasco (luckily, nothing I couldn't afford to lose, though with the price BTC is trading at now it would be really nice to still have those BTC), and any possible partial payout through the bankruptcy process is tied up in potential litigation, I'm a fan of more heavily regulated exchanges that I can actually trust.
Since the MtGox fiasco, I've never bothered trying to liquidate any more of my Bitcoin, and instead just occasionally use it to pay for things which accept direct Bitcoin payment.
I'd be a lot happier with a trustworthy, audited exchange.
If there are smaller exchanges that couldn't deal with the regulation, they probably also can't deal with security, keeping enough secure reserves to be able to pay out in the case of losses, auditing both their security and finances to ensure that they stay healthy and liquidate gracefully if they ever run into financial trouble.
Which it will be, as the vast, vast majority of people aren't committed to accepting endless fraud and embezzlement out of ideological zealotry. Libertarians can still form their own exchanges where they are free to be continuously swindled and conned.
We'll be stuck with the 2-4 exchanges run by the few people still interested in using BitCoin as a way to change the world, instead of trying to use it as a not-yet-illegal get-rich-quick scheme.
So if some anonymous person invents cryptocurrencies, at what point are you supposed to be considered securities? If the first exchange had gone to SEC to register as a securities exchange, would the SEC not have laughed in their face? The headline itself really captures the ambiguity and uncertainty of all of this: "potentially unlawful".
The reason why many cryptocurrencies are considered securities is because there's a certain group of people promoting them as in investment. They are claiming that their cryptocurrencies will rise in value.
If you study the definition of money, and what makes a good currency, there's no kind of money that rises in value merely because you own it. Money is meant to be spent or invested, not hoarded. (Adam Smith's "Wealth of Nations" gives a much better explanation in the first few chapters than I can.)
So, the point that you have to register as a security is the point that you start convincing people to own your cryptocurrency as in investment. At that point, your cryptocurrency isn't money; because money is meant to be spent.
How do you keep the SEC out of your cryptocurrency? Invent a cryptocurrency that functions as money. You will need to figure out how to keep the value stable on a day-to-day and year-to-year basis. That means that the supply needs to expand and contract quickly based on demand. "Mining" based cryptocurrencies can not do this.
Very interesting idea. Have you heard about Basecoin and Seigniorage shares? They are trying to do exactly that: http://www.getbasecoin.com/ Are these coins securities in your opinion?
Why bother using a convoluted blockchain stablecoin rube goldberg machine where you need to jump though several hoops just to use it, when you could use a service like venmo, square, stripe, etc? What use case would justify the need for a stable coin if not for evading the law?
Simple, just look at ETH. ETH is fully programmable currency. It can be locked away in a smart contract and programmed to disburse based on various conditions. A stable ERC20 token would have all the benefits of ETH coupled with the stability of the dollar. That's an incredibly powerful concept, much, much more powerful than a simple payments API with 2-3% fees BTW.
Your comment makes me think of beanie babies during the bubble. They hardly seem like securities, or do they? Your definition implies they are if there are folks assuring you they will go up in value. Also less cray example, old cars, classic records, guitars, art etc. Is a van gogh a security? An antique first printing of moby dick? Thanks!
> You will need to figure out how to keep the value stable on a day-to-day and year-to-year basis.
This is a difficult problem that's being tackled by multiple projects, such as MakerDAO[1] (DAI) and Bitshares[2] (BTS). Also less reputable implementations like Tether[3] (USDT).
A good article for more detail is An Overview Of Stablecoins[4]
"You will need to figure out how to keep the value stable on a day-to-day and year-to-year basis. That means that the supply needs to expand and contract quickly based on demand. "
Of course they would have laughed in their face. Do you see Nasdaq trying to list Dogecoin? There is no ambiguity or uncertainty here - there is a big problem and they're trying to reign it in with gloved hands before it becomes one and it turns into a big economic mess that the government will have to foot the bill to eventually clean up.
This site likes to complain about wealthy inequality - common people like your grandparents and uninformed but good hearted relatives are providing liquidity for a growing number of new millionaires and billionaires to exit imaginary money who have provided less than zero benefit or service to our society and are leaving the country to avoid tax payments and taking money out of our economy.
The very idea that a random citizen in a modern country can invent their own notion of money is beyond problematic so it is confounding that this whole thing has been allowed to mushroom into what it is today.
Proponents like to drag skeptics into crypto debates but that is far off the mark when it comes to the real implications of the current situation.
Some questions to ponder:
When will the government decide it is illegal to create your own money? will those who have already amassed fortunes (even imaginary) be allowed to keep it? And if so why would the citizenry tolerate such a situation?
"money" is a representation of value that is recognised as such by a group of people. If a few people decide that a bunch of stones are now money[0] (in other words, represents value), should they be arrested? Similarly, when a group does the same not to stones but to seashells [1] or salt are they committing securities fraud? Someone decides to do the same for a few hashes on the internet and suddenly they can't? What's the difference?
What about doing the same with currencies recognised in countries other than the one you're in, is that illegal?
Is it really money if nobody's using it like money? When people started using sea shells as money, they were buying stuff with it, not just speculating about its value using some other currency.
The problem with these analogous argument about what money means fails to account for the implicit contract that we all sign as members of a society. If you buy your own island like Sir Richard Branson then by all means do what you please.
Legal tender is perhaps the most important corner stone of a modern nation state, if an entrepreneur can invent their own money and subsume the one issued by a government then you don't have a government. I for one prefer having a government.
This is not a trivial issue as cryptocurrency proponents seem to think it is.
>>if an entrepreneur can invent their own money and subsume the one issued by a government then you don't have a government. I for one prefer having a government.
Nonsense. We've had non-political money before. During the free banking era we had thousands of bank-issued currencies that competed in an open market, and the state was alive and well.
The state exists as long as it has a monopoly on force within its jurisdiction. It doesn't need to monopolize the control of money and imprison anyone who has wrong-think about what they consider to be money.
I understand that a lot of people here don't like cryptocurrency and the get-rich mentality around it, but understand that when you call for laws to prohibit various uses of it, you're calling for people to see the inside of a prison cell because they have different ideas about what money is than you.
So wait, okay, in the 1800s state-and-gold-backed banks issued legal tender in lieu of anything else, this is a fair analogy to cryptocurrency and anybody against cryptocurrency just wants to see people in jail
>Legal tender is perhaps the most important corner stone of a modern nation state, if an entrepreneur can invent their own money and subsume the one issued by a government then you don't have a government.
Legal-tender laws already prevent non-government currencies from subsuming fiat. Nobody is obliged to accept Bitcoin as payment of a debt, but they are obliged to accept legal tender.
And besides that, there will always be demand for fiat at least for paying taxes.
Firstly, I don't think it's likely a cryptocoin is going to destroy any major currency.
I don't agree having a non government issued currency means you don't have a government, for one there seem to be a few countries that use the Dollar or Euro as the de-facto currency.
When they allow a foreign currency to become the de-facto medium of exchange in a nation, the government is basically admitting that it's lost the ability to issue currency and manage its own economy. The loss of economic control involved is so extreme that you'd only do it if you had essentially no other options left - the government is close to failure.
Not necessarily. Government can delegate things up or down - the Euro is not an effect of Germany, the UK or France admitting economic defeat but a realization that a shared economy can benefit all.
Yes, but that's very different - the Eurozone countries are not allowing another nation's currency to become their defacto currency, they're creating a pooled economy where they all still have a voice in the management of the common currency. (And it's still causing a ton of problems, when you consider what's happened in Spain, Italy and Greece.)
It's radically different from allowing your defacto currency to be one managed by another country, particuarly one that has no common economic interest with yours.
There's an exception to that: most European microstates adopted the Euro but aren't part of the Eurozone (nor the EU) and have no power in decisions made about it. Of course I concede that microstates have unique properties that break away from most considerations that are applicable to "typical" sovereign nations but it's not as clear-cut as you describe.
I'd argue this isn't inconsistent; these states are so small they effectively have ceded control of their economy, as well as their national defense, to the larger European community. Kosovo and Montenegro, for example, previously used the German Mark. This seems pretty close to an admission that for whatever reason (scale, stability) they're not able to issue their own currency in a credible manner.
Does it really change that much though? I suppose they would not be able to control inflation, but taxes and tariffs would remain the same. It's not a total loss of control.
> If a few people decide that a bunch of stones are now money, should they be arrested?
As long as they pay (using real money!) the taxes owed on the economic transactions carried using this alternative currency, I think they will be fine.
I know a car dealership that had a customer attempt to purchase a vehicle with a cheque drawn on a currency called RA, or something similar. The customer said that they were paying the sum of $30,000 in comparable spiritual RA. Would you have taken the cheque?
The question is not whether or not someone would accept it. The question is, would it make sense for charges to be filed against you if you had accepted the cheque (or not accepted the cheque).
Obviously not everyone has this same notion about the role of government. Since we (at least aspire to) live in a society of democratic ideals and freedom, what do you say to people who want innovation in this space?
I prefer for government to be wholly uninvolved in the matter of decided which assets constitute currency; it seems to me to be an utter conflict of interest.
Cryptocurrency markets have absolutely nothing to do with forex markets and the suggestion that they share commonalities or should be compared together is both deceptive, ignorant, and perpetuates a volume of misinformation
I feel that's a hand-wavy explanation that doesn't actually explain anything, and is similar to patents being granted solely on being the same thing that was done before, but "on a computer".
> who have provided less than zero benefit or service to our society
Was following your argument up to that point. Making such a value judgment requires, in my opinion, a lot more data and deep analysis. Cryptocurrencies have the potential of loosening the grasp of oppressive regimes over their people. And it takes those other investors for the process to function.
But, the reality and therefore data is needed to judge whether these new currencies can deliver on that promise.
Edit: Want to clarify that I'm talking about *coin buyers/sellers. Not scam ICO backers. Agree that those folks are scum with negative value to society. If the parent was mainly talking about ICO scams, then please ignore my response and apologies for the misinterpretation.
I see the argument that cryptos reduce the grasp of oppressive regimes on here pretty frequently but the truth is that a) the null hypothesis (no effect) has yet to be rejected with any data and b) oppressive regimes are very good at eliminating or severely restricting internet access when it suits them.
A slight tangent -- you can't just take two options and say we don't have any data so we can't judge. We have a prior: most things do not have an effect in this case.
I think a better way to say it is that it helps to prevent turns of current regimes (that already have Internet infrastructure built and used) into oppressive regimes.
I don't know how is that relevant to what I'm saying at all. I never said it can't be used for evil. Also, North Korea doesn't fulfill the condition of being internet-developed area before the turn to an oppressive regime happened.
Do you honestly believe that would-be oppressive regimes with existing internet infrastructure will not turn oppressive because crypto? In the most optimistic scenario this argument deals with b but still suffers from a.
The burden of proof is on the new product, not the current society. I don't think he needs "data and deep analysis", that work needs to be done by the people trying to convince you cryptocurrencies are the future.
When the status quo is disrupted, it's perfectly reasonable to assume that it's a passing fad or won't work out. A product or asset, especially a radical step like cryptocurrencies, succeeding and being valuable is the exception, not the rule.
There's a reason accredited investors exist, because they're expected to know better.
Exchanges of the types prohibited by existing securities laws are not prohibited merely because they haven't proven to be socially beneficial, but because they have proven to be massively harmful.
The idea that cryptocurrency as a subject of trading changes that in any way is a claim which requires some substantial basis before it would warrant an exception to the general rules written into law.
There is absolutely no proof that it's "massively harmful". It's impossible to quantify all of the positive and negative effects of any type of exchange, let alone to "prove" the effects are net harmful.
>>the general rules written into law.
I'm arguing against the principle that we should ban anything not proven to be socially beneficial.
Not to mention the authorities have a dearth of existing legislation under which to already prosecute bad actors in the crypto space. Ponzi schemes, fake ICO's and outright theft and extortion are already thoroughly addressed by existing legislation / property law. Summarily banning the thing you fine inconvenient to investigate is just lazy regulation, at best.
The burden of proof is on the new product, not the current society
Why do you think that's how it works? Society is not a formal debate, and its members should be able to question any aspect of it at any time for any reason, whether or not they think they have a better idea. The entire concept of "burden of proof" is out the window here since many of its mores do not exist for rational reasons!
Though perhaps contrary to your parent commenter's point, the North Korean regime appears to be using Bitcoin speculation to circumvent international sanctions, making as much as $200 million last year ( which would be about 1.5% of its GDP, or 10% of its military budget): https://www.telegraph.co.uk/news/2018/03/05/north-korea-may-...
There's also Venezuela, a rare example of the hyperinflationary failed state cryptolibertarians insist their project is designed to combat, launching its own sort of cryptocurrency project as a way to get more dollars from foreign suckers so it can continue to import the stuff its leadership wants.
Regardless, the null position which assumes the least is not "crypto currencies run by folks seeking to exit into USD provide real value" but rather "do not provide value".
The claim that someone would prove, of course, would be that they provide value.
So that shouldn't offend you that the null position (and the position which satisfies occams razor) is the default stated position.
Instead of criticizing it, you could actually do the work of proving your claim that crypto has real measurable value to a society. Until that's proven, though...
Except it doesn't depend on any particular means of communication. You can print out Bitcoin on paper and physically trade it. You can embed it in an image and trade that. You can physically scan QR codes on each others phones to transmit it. Bitcoin and other cryptos can be transferred via sat phone. The Internet and exchanges are just conveniences.
There are also numerous projects to work around Internet censorship in the crypto space. Such as the Substratum Network (https://substratum.net) and Mysterium Network (https://mysterium.network).
I see you are trying to be clever, but that comment doesn't really bring anything to the table. Sure, you can try to filter/block crypto transactions but that will be A LOT harder than blocking dissident blogs. One of the biggest selling points of many decentralized systems is to be censorship resistant.
thats only true in theory really, because there are many ways to go around the same blocks. eg , by simply storing ur wallet node remotely.
nobody said that there is something special about the traffic, just that the system is set up in a way that does makes it impossible for governments to effectively stop you from enjoying ur rights to freely transact.
Are you implying that because someone lives in an oppressive country that they have no money to transact? I really dont understand your question.
Oppressive regimes tend to control money flow in/out of the country. So if you, for example, have an aunt somewhere outside that wants to send you money -> you just might not be able to receive it, or would need to give some official a slice of the pie. Bitcoin obviously can help as u can just move the money without government oversight.
Crypto is only effective in that regard if you're able to opt-in. The problem is, you eventually need to interface with the fiat currencies for your "wealth" to be useful. The first step an oppressive regime would do is to just ban exchanges.
Acquiring this "wealth" of crypto would be impossible in an oppressive regime in the first place.
If you look though the code and math behind Bitcoin and other cryptocoin projects it's quite evident that there is malice and a manipulative design with even Bitcoin.
OP was making a point about how easy it is to produce cryptocoins (in terms of both launching the software, and in terms of measurable capital cost to mine coins).
Coupled with the history of Bitcoin and what has predominately been the demographic attracted to an quasi-anonymous digital token for trading has been anarcho-capitalists who bought drugs and child pornography on TOR and silk road etc.
For the record, the SEC won't ban cryptocurrency. They want technology (in general) to stay here and potentially evolve into something that can be useful and provide jobs and value someday, so you can still free oppressed nations, but you will need to cooperate with the American government if it's being done on our soil.
The technology cannot discern the intentions of the nation attempting to regulate it. Tyrannical oppression and reasonable regulation both use the same punishment stick to beat those who step out of line.
Anything that can free people from tyranny must necessarily also be able to free them from the burden of obeying laws. The reasonable standards of conduct have to actually be built into the system in order for it to have a limit on what amount of external control is allowed.
Systems with smart contracts would be able to specify that a government actor could interfere--even retroactively--with any transactions that explicitly opted in to that jurisdiction. So you could sue someone over their Ethereum scam, and a judge could rule in your favor, and then a clerk forwards the order to the technical magicians for the digital circuit court, so that you get as much of your money back as is technically possible to recover.
If you don't opt in, you are in the land of caveat emptor, and the court tosses your case because it can't help you, even if you deserved it. Or people could opt in to private arbitration. But if someone wants their mathmoney to be outside the reach of government enforcement, it is necessarily also out of the reach of government protection. If you won't follow someone else's rules, you can't expect that your untrusted counterparty will follow them, either.
The first state to create a solid opt-in jurisdiction for network-based civil complaints will clean up, just as Delaware has for corporations.
>>they're trying to reign it in with gloved hands before it becomes one and it turns into a big economic mess that the government will have to foot the bill to eventually clean up.
The government has no obligation to clean up anything. Claiming otherwise is just an excuse to prohibit people from investing into high-risk assets.
>>common people like your grandparents and uninformed but good hearted relatives are providing liquidity for a growing number of new millionaires and billionaires
If the common good-hearted people are too stupid to control their own money, then they should be deprived of the right to vote and other semblances of legal persohood. What you're suggesting, which is to restrict the rights of everyone, is a disproportionate and illiberal response, characteristic of Big Brother states rather than free societies.
> The government has no obligation to clean up anything.
Sure they do. It's tasked with the ongoing operation and existence of the country, which can be threatened by economic instability. For example, Albania had a civil war literally over Ponzi scheme failures. https://en.wikipedia.org/wiki/Albanian_Civil_War
> If the common good-hearted people are too stupid to control their own money, then they should be deprived of the right to vote and other semblances of legal persohood. What you're suggesting, which is to restrict the rights of everyone, is a disproportionate and illiberal response, characteristic of Big Brother states rather than free societies.
Slamming "Big Brother states" while advocating for the removal of the right to vote and legal personhood is... special.
>>For example, Albania had a civil war literally over Ponzi scheme failures.
Albania is a lawless country where people are murdered across generations in ongoing blood feuds. In such a setting, any major social crisis can trigger a civil war. The solution in Albania is not to restrict private economic exchange. It is to institute the rule of law, by consistently prosecuting crimes like homicide, so that people don't think that extra-judicial violence is an appropriate response to disputes.
There is no chance that a cryptocurrency dropping in value in the West would trigger a civil war, because the rule of law presides in the West.
You're using the violence inherent to Albanian culture, that is independent of any financial phenomenon, as an excuse for putting cryptocurrency traders in prison.
>>Slamming "Big Brother states" while advocating for the removal of the right to vote and legal personhood is... special.
Obviously the comment was not meant to be taken literally, as evident from the comment right after calling the approach "illiberal" and characterisic of police states.
My comment was meant to equate advocacy for removing the right to freely transact with advocacy for the removal of the right to vote. Both are the natural implication of the principle that the subject is too ignorant, stupid, gullible, etc to be given full agency.
Think of it this way: you want the good hearted and gullible people to not be allowed to transact without gatekeepers, but you want them to have the right to vote, without gatekeepers to protect them from demagogues? That's inconsistent.
In other words, I'm saying if you really think the typical person is so incompetent that there should be laws to prevent them from investing into assets that have not been vetted by a government agency, then you don't have enough faith in their competence to give them the right to vote.
Incidentally, the poorest households spend 9 percent of their income on lottery tickets. The fact that this is not only legal, but promoted by state-funded advertising, yet investing in securities issued by non-public companies is prohibited, shows that protecting the public is not the real motivation beyond laws against purchase of non-public securities.
> The government has no obligation to clean up anything
And yet, when millions of individual investors lose more than they can afford that's often what must happen to preserve the peace. If Bitcoin went to $100 today, at the very least we'd see a massive hit to unemployment and disability rolls.
> As big as bitcoin’s market cap is globally, it doesn’t actually appear to be causing a lot of employment
Wealth effects are real [1]. Moreover, I know at least a handful of otherwise-intelligent individuals who used their credit cards to make leveraged Bitcoin plays. At the very least, they'll face collections and potentially bankruptcy as a result of the crypto crash.
It's not clear that the number of people holding Bitcoin gains, multiplied by the wealth effect, is creating any significant impact on the global economy. Similarly, even if everyone who used credit cards to buy Bitcoin went bankrupt, that still wouldn't be that big a deal for the economy.
Right now Bitcoin lacks the kind of leverage and interconnection with other asset classes that made the real estate crash have a big impact. In that situation, for example, you had banks running 30:1 leverage on some assets, which mean that a 4% decline resulted in a total loss of equity.
I agree. I do not believe the cryptocurrency crash will foment a global economic crisis. I do believe it will create temporary hardships for many Americans, hardships which will in some form flow onto state and federal balance sheets.
When you say "many", how many do you think, and what are you basing that number on? I'm not sure the total wealth from bitcoin to Americans is material to the national economy, much less the potential negative change in that wealth.
The stats I've seen indicate that essentially nobody owns bitcoin when you compare it to other commonly forms of wealth, like homes or traditional equities.
I think one estimate was that less than 500K people - worldwide - own more than one bitcoin, approximately worth $10K. Compare that to the US housing market, where there's 100M-odd homeowners with an average value of ~$220K. Let's say there's 200K bitcoin holders in the US with a bitcoin each, so that's ~2 billion dollars in value vs say 22 trillion in home assets, very rough calc. (And yes, some of those have a lot more than one bitcoin, but some houses are worth more than $220K, and the wealth effect tends to happen breadthwise, primarily.)
Nothing "must happen". This is just a cop out to avoid letting people suffer for their own mistakes. Instead the government dumps the cost on everyone else.
If there's no bailout at the taxpayer's expense, what do you suppose will happen? Riots? Revolutions?
Nothing will happen except millions of people learning a much needed lesson.
Really anything that gains value soley due to being promoted would be considered a security SEC v. WJ Howey Co:
> [a]n investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.
The second half is important too: that the expected profits are from the efforts of the promoter. In other words if a company is doing work of some kind, and they are selling a token on the basis that it will go up in value due to the work that they are doing, then it is a security.
If the SEC takes enforcement action against a token, the case would go to the courts, and then the courts would be responsible for deciding if the SEC's interpretation of the Howey Test is valid or not.
It's not about the coins, it's about the intent. If you go to the SEC and say "I'm going to sell pieces of paper of dubious actual value as securities," they'll be interested. The mechanism that the securities use is not important.
The unlawful part is not the technology, it's how the securities are sold. If you sell something that looks like a security, sounds like a security, and smells like a security, and you're violating regulations around securities, then yes, it's potentially unlawful.
Worth noting that the first major cryptocurrency exchange, MtGox, had no accountants and stole a lot of customer money. Preventing that is precisely what the SEC is for.
The SEC generally applies the "Howey test"[0] when deciding is something is to be declared as a security or not. It is "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party."
So a token from an ICO that might accumulate in value if the team delivers is a security. A pure utility token or cryptocurrency is not. This is a major reason why many ICOs shoehorn in some kind of use for their token in their platform (when they could just have used e.g. ETH for payment) in order to skirt being classified as a security.
Do not be fooled by fancy looking "whitepapers", professional websites, and cute mascots.
Whitepapers are bought usually from the lowest bidder who can bullshit technical keyword bingo. This person may not be involved with the company or even know much about the coin itself as often these job listings indicate the project manager themselves knows nothing about the coin they plan to offer except their own personal dreams of wealth. Same with every other part of these ICOs. The daily freelancer job listings are flooded with requests of this nature; I might estimate 1:25 to 1:50 of the offers are for ICO schemes.
There is no requirement that regulators avoid catch-22 like situations. It would be unsurprising if the SEC had responded in such a situation with "Yes, they are likely securities, but no we don't care to elaborate, and we can't undertake approving your exchange because of (insert plausible but kinda lame reason here)."
You have very little in the way of recourse.
However if they determine that you're illegally selling those securities, you better believe that they can and will come after you, in the name of protecting the little guy.
>So if some anonymous person invents cryptocurrencies, at what point are you supposed to be considered securities?
Through the long-settled laws, rules, and procedures used to determine whether anything is a security.
Even though cryptocurrencies are the new hotness, this isn't a new or particularly interesting area of law. The tools for analyzing what counts as a security have long existed.
I'm flabbergasted by how much disinformation is infecting this threat. If you look at the list of legal actions the SEC has pursued at the bottom of the article, they are all flagrant violations of securities law and clearly unethical practices.
For example, in "SEC v. Jon E. Montroll and Bitfunder", the individual in question was accepting "investments" in his exchange that were clearly securities (probably fitting the definition of a public offering). He also failed to report a massive theft of Bitcoin and misappropriated customer funds.
This guidance does not claim that Bitcoin or Ethereum are securities.
This is the birth of a new industry. It's unregulated, messy, and the massive amounts of money involved have invited all manner of fraudsters and scam artists - just like the stock market did 100 years ago. There will be a regulatory shakeout and we can all hopefully get back to the business of building a useful ecosystem.
This comment is written as if it says something important, but really doesn't say anything at all.
It would be monumentally newsworthy if there was clear guidance that Bitcoin and Ethereum "weren't securities" (more generally: that businesses that simply deal in Bitcoin were generally outside the purview of securities regulation). But we do not in fact know that right now.
No expert believes that you can look at the list of current enforcement actions and reliably predict the SEC's next actions. They could keep taking out scammers for the next several years, getting practice by picking out the low-hanging fruit. Or, they could at literally any moment come down like a ton of bricks on the industry's most mainstream participants. We simply don't know.
What we do know is that "coin-mediated" finance is enabling thousands of people to launch investment-driven businesses who would previously not have been able to do that before, not because of a lack of technical ability but because the laws made it prohibitively expensive. Those laws have not been repealed. A lot of reasonable people are waiting for the other shoe to drop.
I'm personally very keen on "coin-mediated" finance. However, that doesn't mean I'm stupid enough to believe I can flout securities law without consequences. A public offering is still a public offering when you couch it behind a token, no matter how cleverly constructed your whitepaper.
If the SEC was going to come down like a ton of bricks they would have done so already. I could be wrong, but their actions seem to demonstrate that they're taking a very measured, careful approach to coming up with a regulatory framework.
My comment was a reaction to other comments, not the statement from the SEC - which actually doesn't say much either.
I think reasonable people can disagree about the likelihood of upcoming enforcement actions. The only place where I feel entitled to get shouty about things is when people suggest that it's clear what the SEC is going to do next. I think it's easy to make a case that it's anything but clear.
I definitely wouldn't feel comfortable proclaiming with any certainty that Bitcoin or Ethereum or even ICOs were definitely going to fall afoul of the SEC. My understand is that the SEC is generally a lot smaller than "we" think it is and it's sort of a random function. Cryptocurrency is super important to HN, but the SEC's definition of "systemically important" is different than ours.
> My understand is that the SEC is generally a lot smaller than "we" think it is and it's sort of a random function. Cryptocurrency is super important to HN, but the SEC's definition of "systemically important" is different than ours.
Their mandate is to protect unsophisticated investors. That's why they weren't particularly interested in Madoff, and why the rules are so much laxer if you target "accredited investors."
Given that mandate, I think it's highly unlikely that they're going to go after romping, runaway successes. They'll focus on blatant pig-in-a-pokes.
I think they're sort of caught between a rock and a hard place - a lot of "retail investors" have bought into cryptocurrency at this point. Aggressive action by the SEC to crack down on digital currency would adversely affect the price of said currency, almost certainly harming "retail investors" in the process.
I'm using quotes because that's code for unsophisticated investors, the very group the SEC is supposed to protect.
> It would be monumentally newsworthy if there was clear guidance that Bitcoin and Ethereum "weren't securities"
The SEC refers people to the Howey Test in all of their statements, which is fairly clear guidance that they don't consider Bitcoin to be a security. With something like Ethereum they're not going to say, since something can alternate between being a security and not being a security, so any sort of specific guidance wouldn't be especially meaningful.
>This comment is written as if it says something important, but really doesn't say anything at all.
It's ambiguous what 'it' refers to (comment vs. the article) in your sentence. If you meant the comment, then I disagree because it doesn't pretend to say something 'important', it just points out that the article doesn't introduce anything new for people doing things that aren't clearly a scam under existing laws.
If you meant the article doesn't say anything important, then I agree and I don't think the comment you replied to says anything different.
Hmmm, very good point - I think I might have misinterpreted that line. The danger of an unclear subject ;-)
Agreed. The main thrust of my comment was that this is a non-article, and yet it seemed to be inviting commenters to lay out their pet theories on the validity of cryptocurrency as though they were validated somehow by the article's contents.
The problem is that you need a decentralized SEC, that somehow obviates the existing SEC, and all other similar government-empowered agencies all around the world. Good luck with that. You've got a long road to hoe just to convince people that's a good idea; it certainly isn't obvious to me. Without that power inevitably just collapses back to the central authority for all kinds of reasons. (Many of which are the reason why the stable solution in the existing economy is indeed the existence of a distinct SEC.)
I think the concept of accredited investor needs to go away though. Why should only the super rich be able to invest in risky ventures? Why do I see so many on the left supporting these regulations that only favour the super rich? I'm not just talking about crypto-currencies but any venture really, since the internet at least, anyone with an internet connection should be free to invest as they want. I'm personally not into ICOs or gambling in general but if that's your thing you should be able to do so.
When I first read your comment I agreed, however as I think about it, this type of regulation prevents lower income people from transitioning to a different class. I'd say the funding spent on this type of regulation would be better spent on social safety nets.
People should be free to take financial risks. There's currently nothing stopping people from investing everything into a small business, or blowing it all at the casinos or on lottery tickets. There's no justification for singling out securities and limiting people's right to invest their money in them.
"I think the concept of accredited investor needs to go away though."
At least some modification of who can be an accredited investor. Keep the current 200k income or 1 million in non-residental assets. Add some kind designation where you can declare an asset set aside for more risky (accredited investor level) investments and, after a year of sitting to prevent rash decisions, you are allowed to invest those assets in the risky investments. That would at least prevent people from cashing out there IRAs into obvious bubble situations and pyramid schemes and loosing all of their retirement assets. A lot harder for a con man to keep you fooled for a whole year.
I think because finance is complicated and people can be ripped off or not understand their investment. It would be interesting to revise the accredited investor to allow small investments individually and in total (eg, no more than $1k/year or something).
Without this rule, grandma and grandpa would be constantly bilked by investing their $50k into bad investments.
How can something structured as a Pyramid-Ponzi scheme be considered a legitimate new industry? I've yet to see anyone address - while referencing the Pyramid-Ponzi structures of the most popular crypto-assets - and give reason as to why this is okay (when traditional Ponzi schemes are not legal, and for good reason).
Here you go. This chart breaks down the differences between Pyramid schemes, Ponzi schemes, and open public cryptocurrencies such as Bitcoin. By "open public" I mean that there is no central authority or organization. Bitcoin is a decentralized open source project run by community participation (anyone can run a node or miner, and millions of people do).
>"This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities. Since Exemption 7(A) protects the records from disclosure, we have not determined if other exemptions apply. Therefore, we reserve the right to assert other exemptions when Exemption 7(A) no longer applies,"
That list at the bottom is not exhaustive! It's just a few enforcement actions that the SEC wants you to read. They also do worse things.
For instance, the SEC threatened to prosecute the DAO [1], which was certainly not a "clear unethical practice", or "flagrant violation" of securities law -- just a bunch of people voluntarily putting their money into a pool to vote on what to do with it. They could even withdraw their money at any time.
"The Commission has determined not to pursue an
enforcement action in this matter based on the conduct and activities known to the Commission
at this time"
I mean... it sounds to me like they did their due diligence. The PDF contains an in-depth look at how existing securities law intersects with what this group was doing. That's exactly what the SEC is supposed to do.
DAOs are new and unfamiliar. They looked at what was going on and decided not to pursue further action. That seems quite reasonable to me.
> The Commission has determined not to pursue an enforcement action in this matter based on the conduct and activities known to the Commission at this time
What they mean is:
> We chose not to beat a dead horse, because it's already dead.
I don't see why that matters. They clarified that DAO tokens are securities but decided not to pursue any action for a number of reasons, one of which being (and they've stated this elsewhere) that prior to their clarification there was ambiguity on this issue.
The tl;dr is that they are clearly securities under existing law. Now that the SEC has clarified that fact companies are free to issue Tokens if they comply with the law.
> When the SEC says...what they mean is: we chose not to beat a dead horse, because it's already dead
The SEC charged Bernie Madoff's auditors after the scheme had been revealed [1]. In respect of the DAO, the SEC appears to be taking a "wait and see" approach. (With ICOs, on the other hand, we've seen enough.)
Every day that goes by is a day when they could’ve taken action but didn’t. The stuff they publish on the topic all seems reasonably well thought out, and is always consistent with a “we just want you to follow the rules in place even if you’re using novel tech to do things” mentality.
Sure, they can pivot into rabid dog mode at any moment, but they’re allowing things to proceed while being aware that it’s gaining more mainstream appeal.
The sort of posture you’re advocating is the same sort of scaremongering as the “this is all a Ponzi scheme that will blow up any day now” types are spewing.
It looks like they are going after the exchanges, see this choice quote:
> A platform that trades securities and operates as an "exchange," as defined by the federal securities laws, must register as a national securities exchange or operate under an exemption from registration, such as the exemption provided for ATSs under SEC Regulation ATS.
And it says that online wallets may qualify if they facilitate trading:
> Some online trading platforms may not meet the definition of an exchange under the federal securities laws, but directly or indirectly offer trading or other services related to digital assets that are securities. For example, some platforms offer digital wallet services (to hold or store digital assets) or transact in digital assets that are securities. These and other services offered by platforms may trigger other registration requirements under the federal securities laws, including broker-dealer, transfer agent, or clearing agency registration, among other things. In addition, a platform that offers digital assets that are securities may be participating in the unregistered offer and sale of securities if those securities are not registered or exempt from registration.
This will not scale, being that many of the modern cryptocurrencies make it really easy to implement token exchange mechanisms. Fully de-centralized exchanges are coming too, how are they ever going to regulate that?
Possibly like pretty much everything else: by writing or clarifying regulations that make such things a violation and then painstakingly going after the most extreme violators and punishing them severely enough that it changes the risk calculation for everyone. Very few things (I can't think of an example) are regulated to the point of impossibility, they are just regulated to the point of implausibility.
Through attacking the link between cryptocurrencies and the fiat banking system.
It really doesn't matter if you can trade $10MM of bitcoin for $10MM of ethereum if after doing so you are unable to pay your rent with it.
Throw some KYC/AML laws on accepting cryptocurrency deposits so that it's treated like a cash deposit for regulatory purposes. Accept as a regulator that a lot of small-time stuff is going to slip through the cracks, in exchange for making gross violations problematic.
Like, if you could fit ten million dollars in cash in your pockets, you'd already have trouble getting it into your bank account without a rock-solid explanation as to how you got it. Bitcoin etc is no different - the US government can avoid caring until you try to spend dollars, then nab you for violating regulations.
> Fully de-centralized exchanges are coming too, how are they ever going to regulate that?
That's an interesting thought that I hadn't considered. I mean, when we think of trading stocks, we tend to exclusively think of brokerages and the like and forget that at one point in history, it wasn't uncommon to actually hold a stock certificate in a safe somewhere. It's before my time, but I believe you could turn around and sell that certificate to someone else without involving anyone. Were it a straight cash transaction, it would be trivial to perform without anyone but the two parties involved being aware of the transaction.
In the case of a decentralized trading platform, one could trade between crypto-currencies without the ability of the government to regulate it, but once you wish to turn it into hard currency, that's where regulation can step in. What would be more interesting, though, is if the "original promise" of bitcoin -- that it could be used without turning it into cash (buy a coffee with Bitcoin!) -- became a reality. Unfortunately, it's looking like that's headed more and more in the other direction. I have a feeling, though, if regulation steps in hard, there'll be greater motivation to solving the problems that have made this difficult in the past[0]. Combined with some of cryptocurrencies aimed at increasing/providing anonymity to transactions, you start to head more toward a very difficult to regulate set of circumstances that might resemble the difficulties the copyright industries have had attacking file sharing technologies[1].
[0] And while there has been plenty of motivation and I'm aware of some folks actively solving this problem, the motivation among all stakeholders has to be there, as well.
[1] Though the government has far more motivation to solve this problem than it did as it relates to copyright infringement -- I'll admit it's not a great analogy once you start digging into the details.
It definitely won't make cryptocurrencies worthless, but it could tank their value if they start chasing exchanges and adding burdens to new customers on exchanges. If regulations like this start popping up in many countries it could largely do damage to the boom in the field.
So crazy thing about government, they can deem themselves regulators of anything. Some choices are certainly easier to police than others, granted, but they don’t have to massage their definitons to declare something illegal.
There's no massaging. The potentially illegality of many cryptoasset platforms has always been clear to everyone who wasn't in denial. They're trying to race ahead of law enforcement. Kind-of like Uber, but the SEC is a lot harder to plow through than local traffic enforcement.
I, for one, welcome our PonziCoin-banning overlords.
>>I, for one, welcome our PonziCoin-banning overlords.
That's a pretty totalitarian outlook. You're not content with not using cryptocurrency yourself. You want to prevent everyone else, with punitive measures, from using it too.
Of course not. Two parties coming to an agreement in a free market to trade currency for a GPU is not a violation of a third party's right to buy that GPU. Putting two people behind bars because they traded some 1s and 0s that happen to be valued by some set of people is a flagrant violation of rights.
My right for me to not have you interfere with and restrict my private interactions. My right to privacy, in keeping the 1s and 0s to myself, and free speech, to publish any series of 1s and 0s I want.
I didn't see any cryptocurrency exchanges in their list of approved exchanges. How does one find out whether a cryptocurrency exchange is registered properly with the SEC?
It's very simple. The SEC will prosecute one of the big boy "exchanges" and bring that company to a screeching halt. All of the rest will have to meet stringent regulatory requirements in order to service American customers.
Coinbase/GDAX have always focused on compliance, and Circle discussed the Poloniex acquisition with the SEC beforehand, and both are actively working with regulators. How that turns out will be interesting to see
Coinbase has been extremely conservative in which digital assets it supports (viz., only Bitcoin, Litecoin, Ethereum, and Bitcoin Cash). None of these are securities.
From my untrained perspective it seems like they are warning against "the appearance of a regulated market". Therefore, all these markets should do is have a big banner at the top stating:
"We are not regulated by the SEC and any activity here is not protected by any rules and regulations which might apply to a SEC registered company. Please be careful"
They explicitly note that the law requires anything that is an exchange for trading things that meet the legal definition of a security must either (1) meet the requirements for and register as a national securities exchange or, (2) qualify for and secure an exemption under one of the existing legal exemptions from the registration requirement.
They note that they are particularly concerned about customers mistaking something for having the features of a regulated exchange when it does not, but the legal risk and basis for enforcement is not limited to that kind of confusion. So, no, simply announcing that you are an exchange which doesn't comply with the registration requirements won't help, and might hurt.
It seems unlikely that it would be that easy. If it were, you'd see lots of unregulated stock markets out there in the wild (which, to my knowledge, is not the case).
Yes but there are many many markets out there which don't have any sort of regulation. The SEC's main quarrel right now appears to be that they believe investors might come to an exchange and invest believing they are as safe.
Well for one any sort of auction/market like ebay, flee market, high end auctioneers, the like. They are trading precious metals/jewelry, other objects in which the buyer hopes to profit at some later point in the future. No one is out there buying XYZ widget in the hopes of burning their savings.
No one is buying an ultra rare watch for $10 million in hopes that one day it will be worth less.
FWIW, that is the explicit mandate of the SEC. It could be a power grab, but protecting unsophisticated investors is exactly what the SEC is supposed to do.
Well, currently you have to convert cryptocurrency into hard currency to use it, but the former isn't true. I have mined all of my cryptocurrency and that's pretty common among my peers.
Money changed hands for me to get that currency -- money paid to the power company and to a few eBay sellers for video cards -- but nothing requiring an exchange fit-for-purpose.
If purchasing with cryptocurrency ever truly becomes a thing (yeah, I know it exists, but it's rare and becoming more rare these days), that will affect the other side, as well.
It's effectively the only way to do it but the way around it is fairly simple: use a bank account on another country, one that is OK with crypto along with non-US based exchanges.
I wasn't describing that with the intent of laundering money, I mean simply having money in a different jurisdiction and using it locally. I can use my cards from different countries (I've lived in a bunch of different places) pretty much anywhere around the world, the money I have there in those currencies is subject first and foremost to local laws.
Of course it won't stop trade completely, but it could tank the price and cause interest to drop off as that's significantly higher effort than "sign up here, use your credit card or bank account directly".
There are numerous solid systems-theoretic, information-theoretic, psychological (not unrelated to the two above), and sociological reasons to not expect decentralisation to be a major force.
Amazon, Google, Facebook, Microsoft, Apple, and Twitter haven't exactly decentralised their respective areas of operation. Despite no intrinsic barriers (other than the four mentioned above) to decentralised systems developing.
Even Mastodon has largely settled on a small number of very large nodes.
You could argue that there was no new information in the DAO guidance, too, but it did sharpen the public perception of the SEC's position. I think this warning is doing the same.
Also, ICOs and exchanges are different beasts, both subject to SEC jurisdiction. This is about regulation of and enforcement against exchanges, not ICOs.
Can anyone tell me if Valve's Steam Marketplace would constitute a "securities" platform. What is the diffrence between Valve facilitating the buying/selling some ingame currency for arbitrary amounts of real dollars between users and facilitating the buying/selling of a cryptocurrency?
No. The difference here is 99% of people holding crypto assets are doing so as (and literally calling them “Investments”). People putting money into steam are knowingly doing so for the purpose of playing games.
The former represents a significant threat to the stability of American households when a large portion of the population thinks they are “investing” in something that is also not required to follow the safeguards in place for investments. In case you didn’t realize it, there are many many people putting much more money into crypto than they can afford to lose. See credit card purchases on Coinbase for more info.
I’d just assume let stupid people be stupid people, however, when millions of those stupid people collectively lose their money together...it creates huge societal problems and strain on government services which you and I have to pay for...with US dollars of course.
A lot of people on this thread are conflating Bitcoin and other cryptocurrencies for what the SEC is talking about in this statement: tokens that are acting as securities. They do not mean Bitcoin and similar tokens (ETH, LTC, ADA, NEO, etc). If you've been following the SEC's other statements, testimonies, and senate committee hearings, you would know that they do not have a problem with digital currencies per se. That is outside of their mandate (those fall under the CFTC's purview). What the SEC is concerned with is companies that issue digital tokens which act as securities. That is to say, the reason people buy the tokens is the expectation that the work of the company that issued the tokens will cause the value of the tokens to increase, and that is the motivation for people to buy them.
This differs from Bitcoin, which is not issued by any company and has no central organization that does any work or promotion of the token.
The response from American cryptocurrency exchange Bitfinex expresses the distinction between securities and other types of tokens:
“As a U.S.-based digital currency exchange, Bittrex is committed to incubating new blockchain technology projects and offering innovative, compliant digital tokens to our customers. Bittrex uses a robust digital token review process to ensure the tokens listed on the exchange are compliant with U.S. law and are not considered securities. Bittrex is committed to helping advance the United States’ global leadership in this emerging industry, and we look forward to continuing our proactive dialogue with the SEC and other regulators on how to build a secure, fully-regulated environment for blockchain that encourages innovation and economic growth.”
Regulated exchanges have in place a lot of measures to ensure transparency and protection of traders/investors including survailance systems which closely look at potential market manipulation. Currently no crypto exchange has such systems in place - even their matching engines are in question, as mentioned by the SEC.
Given the amount of money that is traded every day at crypto exchanges the statement from SEC was expected, but they seem to think that the crypto markets are too important (too large) to go the Chinese way - to shut down crypto exchanges that do not comply with basic rules that all exchanges should follow. But maybe this is just a warning and they will do it later, who knows...
Please consider your words.. I see many posts using "money" interchangeably with "investment"; and misunderstanding the financial definition of "exchange" (eg trying to argue eBay is the same as Coinbase). Maybe that's the disconnect, the word doesn't mean what you think it means.
Like using webapp, app and program interchangeably "well they all run on computers right?"
We don't know Binance was hacked. Relatively few people use API keys to trade and every reported account had API keys on it. It's likely some malware that looks for API keys in config / python files laying around.
That's not a very sophisticated hack, but it's technically a type of hacking. In the same way that if you leave your keys unlocked in your running car overnight and someone gets in an drives away with it, that's still theft.
Everyone knows that orders are executed fairly on SEC regulated exchanges, right? Ehhh, not really.
It's important to look back on Flash Boys and recognize the reality of regulated exchanges. Ultimately consumer demands will drive the ethical operation of any exchange.
Polo / Circle discussed with the SEC before the purchase. SEC provided an exemption from prosecution provided Polo registered as a fully licensed exchange.
The whole regulatory framework behind cryptocurrency is a mess. IRS classifies cryptocurrencies as a property, while SEC classifies some as a security. Which only makes it harder to regulate. Problems like these need to be solve in order to help the ecosystem mature in a sustainable way.
Unless the decentralized exchanges get a licence, they'll still be illegal, right?
I could imagine jail time for the developers for knowingly supporting illegal activity would seriously dampen enthusiasm from the open source community. Also, depending on how decentralized such an exchange is, this would expose its customers to the same type of consequences (or possibly "just" large fines). It would not be too difficult to pass a law prohibiting consumers to knowingly trade on non-registered exchanges I'd think. (Possibly this is already illegal in your particular jurisdiction, IANAL)
I've never heard of anyone being prosecuted for writing open source code.
It would be a direct affront to the First Amendment, and it would be remarkable if the US government ever did this to anyone residing in the US, let alone someone residing in other countries where different laws apply.
I could maybe see the Chinese government taking such action, but it has much less influence globally than the US, and a relatively small portion of open source contributors reside in Mainland China.
>>It would not be too difficult to pass a law prohibiting consumers to knowingly trade on non-registered exchanges I'd think.
Such a law would be widely ignored. Just look at illegal filesharing.
Ultimately digital currency will force the US to decide whether it's a free society, or whether it mandates that people transact through centralized gatekeepers. Hopefully it will choose the former.
even if SEC comes raining down hell on exchanges, it will not bring any value on the long term. Decentralized exchanges are popping up like flies, each new one being more close to the "fully decentralized" concept (see idex, etherdelta, radarrelay, anything 0x related, etc).
It is very clear to me that SEC has no idea how any of this works under the hood and does not understand in which way the crypto ecosystem is headed. I feel like they ought to work more tightly with the industry's thinkers in order to create some more meaningful guidelines.
This is a press release - nothing more. A CYA from the SEC in case something blows up tomorrow. It's not a cease and desist letter to the exchange operators - so on balance, this is good news for them. I think the SEC is not confident that the courts will support their position, and so the next best option is.... a press release.
What you're looking at is not a press release, it is what's called "administrative guidance" (https://en.wikipedia.org/wiki/Administrative_guidance) -- a regulatory agency laying out its interpretation of how existing laws and regulations apply to a given situation. Regulators do this to remove ambiguity, so regulated parties know what the agency expects them to do in order to stay on the right side of the law.
In this specific case, the SEC is advising crypto-based operations calling themselves "exchanges" that this is a word that has a special legal meaning, and that therefore if they want to continue calling themselves "exchanges" they either need to comply with the same licensing requirements that apply to other "national securities exchanges," or demonstrate a good reason why those requirements don't apply to them. (And not just to crypto in general, to their specific operation in particular.)
The reason this matters is because, now that the SEC has officially gone on the record with this statement, crypto exchanges can't say they weren't warned if they continue using the term and the SEC comes after them later. This statement is their warning that they need to either get licensed or stop calling themselves exchanges. If they choose to do nothing and just keep on calling themselves exchanges, and the SEC takes them to court over it, they won't be able to argue that they didn't know what they were required to do to use that term. The SEC has just told them what they need to do. The ambiguity has been removed.
> In this specific case, the SEC is advising crypto-based operations calling themselves "exchanges" that this is a word that has a special legal meaning,
Really? I didn't get that reading at all. The discussion of the use of the word "exchange" is under the guidance for investors, not the guidance for trading platforms.
The guidance for trading platforms specifically talks about which assets are being traded and how determining what type of registration is required (national security exchange, ATS, broker-dealer, transfer agent, etc...)
"A number of these platforms provide a mechanism for trading assets that meet the definition of a "security" under the federal securities laws. If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration. "
It's possible I'm misreading the specific requirements -- I am not a securities lawyer, my HN comments are not legal advice, etc. If you are operating one of these platforms, the issuance of this document is a good reason to have a chat with a qualified attorney to figure out exactly how it affects your business.
But that just underlines my main point, which was that this document is a lot more than just a press release.
Did you notice the list of enforcement actions at the bottom of the page?
The SEC can't just blanket C&D every single crypto exchange; they have to go one at a time. This is a clear message that they're going to do just that, especially when coupled with all the enforcement they're doing.
Those are for Bitfunder and the like, where the issues are more about fraud than about the correct classification of coin offerings. There is no enforcement action against Coinbase for example. If the SEC was that confident in its position, then they would have gone after Coinbase, and we would have heard about it on CNBC first. This is a tacit admission from the SEC that they don't have much of a legal basis to stand on for such enforcement.
