A quick legal analysis of nature of cryptocurrency

I was thinking a bit more over the weekend on the true nature of crypto-currency from a legal point of view, following up on the idea that it is constitutionally protected speech.

What we call Bitcoin, Ethereum, Steem, ZCash, ERC20 tokens etc are actually just statements in great big books that are held in thousands of matching copies all over the internet. These books get new chapters all the time as new blocks of "transactions" are issued.

The fact that tens of millions of people are ascribing value to these statements doesn't change their inherent nature. They are simply written expression and nothing more. In legal terms they are constitutionally protected speech.

There are actually many other things that are also just a literary or artistic expression in digital form that people ascribe value to:

• digital music;
• tv series in digital format;
  -e-books;
• limited edition digitally signed artwork;
• Steemit posts :-)

Many of these things are bought and sold for value every day, yet the SEC has never suggested they are a "security".

When an artist sells 1000 limited edition digital artworks, the buyers hope that they will increase in value as the artist becomes more famous, and the artists funds his future work with the proceeds.
How is this different in essence from an ICO?

Some might say that these literary and artistic works are unique, but remember, technically every Bitcoin is also unique, as is every public and private key. In any case uniqueness or merit are not requirements for 1st Amendment protection.

Thus cryptocurrency is fundamentally just a written work that people ascribe value to.
Legally, it can be an asset, like fine art, but it can never be a security.
People may chose to use it as money, but just as a cowrie shell used as money is still a cowrie shell, blockchain entries remain speech, no matter what they are used for.

Thus while government can make rules restricting the use of:
a) physical assets such as gold, silver and cowrie shells; and
b) intangible assets created by government rules, such as fiat money, shares, bonds, derivatives etc,
the US government can't make rules restricting the actual exercise of free speech (which is what transactions on a blockchain are).

However it is important to note that I am talking about cryptocurrency in its native form, on the blockchain (or tangle or whatever other data structure is being used).
Once that cryptocurrency is moved onto a centralised exchange, its nature changes completely.
It is not longer speech: it is a legally binding promise by the exchange recognise a certain amount of a cryptocurrency in their systems as belonging to you. In legal terms this is a chose in action, a type of legal right. This can be regulated by the US government.

Thus once on a centralised exchange, cryptocurrency ceases to be speech loses its 1st Amendment protection. Decentralised exchanges, such as Bancor, do everything on-chain and so remain within the free-speech protection.

However, despite this important limitation, it invalidates most SEC action regarding cryptocurrencies to date.

An ICO, where a person does on-chain transactions exchanging BTC or ETH for some ICO token, is solely an exercise in free speech which neither the SEC nor any government body has no legal authority to regulate.