SEC Regulates Tokens
Recently the SEC decided that they have jurisdiction of international blockchains on decentralized networks.
What this boils down to, is tokens like the DAO are considered securities within the USA. What this means is that exchanges that operate in the USA, such as Poloniex, Bittrex, or Coinbase will not be able to carry such tokens in the future.
Offering public securities for sale in the USA which are not registered by the SEC is illegal. Accredited investors in the US, are people who have net worth above $1 million dollars and they will be the only people legally permitted in the US to invest in start-ups such as the DAO which sell securities.
The difference between a cryptocurrency and a security are nuanced. The SEC did seem to recognize in their report that Ethereum was a currency and not a security.
Tai made a video covering this issue with an experienced lawyer, this is worth a watch if you are an investor or if you do blockchain projects:
Even people outside the US can fall into legal trouble, from what I know. If businesses or enterprises outside the US, market their securities to US citizens in any way, charges could be pressed in the future, and I am not an expert, but many countries have extradition agreements with the US. It is certainly something to look at if your security can be sold to US investors.
The wonderful thing about the Ethereum blockchain is, all of its ICO's and token issuances can be sold to US investors. There is no way to limit that on a blockchain. Interestingly, the SEC does not care about code. They focused largely on marketing materials associated with the DAO rather than what the code said it was.
Their full report is here: https://www.sec.gov/litigation/investreport/34-81207.pdf
A token like TenX is probably also classified as a security, just in my limited understanding of the Howey Test.
Good thing I prefer currencies and not tokens. Tokens will generally be limited by the same limitations that face stocks. Currencies can trade into the multi-billions without any issues.
Unrelated to this post.
https://www.lampix.co/token.html
Interesting database idea for Lampix as they try to decentralize the digital image world. Not completely convinced of their product or necessarily the need for a token to access the images, but I agree with their spirit. I want to see an aug reality world and I'm glad folks are trying out different ideas like this.
So I guess the WAVES currency should be safe in this case. Also, I haven't seen it stated anywhere, but I wonder if the true EOS token issued next year will be a currency. I would think so, and I'm sure that team is watching this closely to make sure they do it right.
Thank you for explaining this further. So as long as we're investing in currencies, we're in the clear. How would this for example deal with EOS? Dash for example is a currency, so we're ok, but EOS I'm a little foggy on.
Orion, it goes by the howey test. I think the only reason that Dash might pass the Howey Test is not because it is a "currency"... it has a governance structure, it has other features that the DAO has. The thing that might exclude Dash would be that it had no ICO. There was no capital raising round, it was just a code launch where people mined it. However, because of the initial mining scandal, if there was "management" involved in that where they mined themselves many coin, it actually could revert back to falling under the Howey Test and being a security. Only a lawyer could tell us really.
With EOS I have no clue. They called Ethereum a currency... but Ethereum had an ICO, and is effectively governed by the Ethereum Foundation, and is not really decentralized. The hard fork just kind of proves that point.
Ethereum specifically launched in Switzerland to avoid the SEC, so that the SEC would basically call it a currency and not a security is a little odd to me.
In the US, I cannot issue a bunch of tokens to people in exchange for capital, and then launch a cryptocurrency from it. It is just illegal here in the US. So maybe it's a different law that falls under besides SEC securities laws... no clue.
What I will say, is that regulators seem to favor that "mining" means it is some new technology and not a traditional security. So maybe because Ethereum is mined it just falls under the blanket ignorance of government to avoid regulating that.
Thank you for the response. This is something we're going to really have to keep up with and pay attention to going forward. As the crypto world starts to make it's way into the main stream light, I can see mountains of cash moving in looking for returns and USD alternative safe havens. Being in "currencies" moving forward seems like the smart and safe play here. While I love EOS and everything it stands for, it's year long ICO I imagine would put it directly in the cross hairs. I fear this is going to limit our options dramatically going forward on what cryptos we'll be able to invest in, but on the other hand as you pointed out, currencies literally have no top, so if we position ourselves correctly, we could see some incredible gains. This is starting to make BTC look more attractive if it does indeed keep it's "reserve currency" status in the crypto world.
Very good post, i was just involved with LOTS of SEC coin, this makes me look at it differently...even tho it is going so high right now...Upvoted!
Very interesting Ted. US Government is doing its best to maintain control - whilst other governments seem to be easing up. It is a great time to be alove mate. SK.
That's good to know thanks for updating.
Wow thanks foe this - I wasnt aware....hmmm have to keep it in mind and research this more.
We think alike! Upvoted!
My analysis nailed the recent Bitcoin bottom and start of rally! Please check it out at: https://steemit.com/@haejin
nice...
I voted in your post hope I can do the same to my =)
https://steemit.com/life/@kingoflek/march-in-the-mountains-of-brazil
thank you.
Hello! I just upvoted you! I help new Steemit members! Upvote this comment and follow me! i will upvote your future posts! To any other visitor, upvote this post also to receive free UpVotes from me! Happy SteemIt!