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Imagine it's a network-connected resource like server time or file hosting. Those aren't securities right? So now just imagine a token that has the same funct

by jMyles 9y ago

Imagine it's a network-connected resource like server time or file hosting. Those aren't securities right? So now just imagine a token that has the same functionality. You receive a token that does something useful. Do you use that token wisely? Or do you make bad business decisions? There are tokens that people are buying to use, not just to HODL.

yazaddaruvala 9y ago
Imagine a piece of paper. Like what you'd find in a notebook. Those aren't assets right? So now just imagine a token that has the same functionality. You receive a token, it's made of paper like the notebook but does something useful. Should that token, the piece of paper be regulated? Lol yes, it's now money! And all other assets or securities are regulated.
- debacle 9y ago
  Paper has utility outside of its value. Most coins do not.
  - crankylinuxuser 9y ago
    I'd counter specifically with Ethereum or Filecoin. They both represent either computation-time or file-storage-and-bandwidth time. Ethereum could easily represent time on a distributed AWS Lambda. And FileCoin can represent an AWS S3 storage. It just so happens that they both are also cryptocoin. It gets even uglier that the turning-like machine in Ethereum/Solidity also exists, kind of, in Bitcoin. In fact it was because it worked in Bitcoin they developed Ethereum. So technically even Bitcoin can do processing work. Makes everything a bit murkier to be honest.
    - debacle 9y ago
      You're not countering anything. I'm aware of both. The SEC is going to have to decide if these coins having utilities makes up their value. These aren't new concepts. People have been trying to get around regulation for thousands of years.
- hobbyjogger 9y ago
  Why do you not consider paper to be an asset? Pretty much anything that can be bought and sold is an asset. Yes, that includes notebooks and paper.
- gamblor956 9y ago
  Your metaphor doesn't make sense. Are you saying that the token lets me write on it and make toy airplanes? Because if so, then the token wouldn't be regulated... If you're saying that the piece of paper represents ownership of something, then the paper is most likely a security or derivative, in which case it is already subject to regulation. A token with the same functionality as this piece of paper would be regulated, and vice versa...
tptacek 9y ago
Which is it? Is it that these tokens aren't really investments, but rather utility instruments people are buying to obtain restaurant reviews? Or is it that it's so unfair that the SEC requires these kinds of companies to register before selling to the public like everyone else? It looks to me like your argument is oscillating a bit.
- jMyles 9y ago
  Well, the exciting part might be that the line between investment and utility instrument is blurring. It seems to me that these two categories needn't be separated by a bright-line.
  - tptacek 9y ago
    A particular instrument might blur the lines in terms of how it's packaged and promoted, but the underlying activities aren't blurry at all. People who acquire an asset in the hopes that its price will rise so they can resell it on a secondary market are speculating ("investing"), full stop. Obviously, this isn't the first time we've had offerings ostensibly taking these forms. People used to buy comic books in the hopes of their appreciation. Ty sold Beanie Babies to people who were stockpiling them for eBay. The reason Ty didn't get in trouble, but Munchee did, was that Ty was never stupid enough to record videos extolling the once-in-a-lifetime opportunity people had to 9x their investment in restaurant review coupons. Again: a very significant component of the SEC's concern is about marketing and promotion.
    - stale2002 9y ago
      Are you arguing that beanie babies and comic books are securities? How about bars of gold? They are certainly speculation. But I doubt the SEC would ever claim that literal bars of gold (not notes, physical bars of gold) are securities.
      - tptacek 9y ago
        They are not, but the reason they are not is instructive.
gamblor956 9y ago
If the coin represents ownership of a resource (or a right to a resource), it can be a security (though it might be a derivative instead, governed by a similar but entirely separate set of rules). Being a security does not mean it can't also be something useful; it just means that the security aspects of it are potentially subject to securities laws. EDIT: Beanie babies aren't securities because you actually the beanie baby. However, a piece of paper entitling you to ownership of a beanie baby could be a security.
- michwill 9y ago
  All right, but if the coin is inseparable part of the resource, it cannot be a security. There is a thin line here. Imagine a coin securitizing Bitcoin miners ("cloud mining coin"). Yes, that's a security. Now imagine Ethereum. It was ICO'd, talking in today's terms. Is it a security? (hint: SEC just admitted it's not)
  - gamblor956 9y ago
    All right, but if the coin is inseparable part of the resource, it cannot be a security. There is a thin line here. True, but then you're limited to things which can be stored in a blockstream in the space allocated to a single coin. There aren't many useful resources that could fit into that space, even fewer that would scale. Now imagine Ethereum. It was ICO'd, talking in today's terms. Is it a security? (hint: SEC just admitted it's not) Unless there is something about Ethereum that I'm not aware of, it does not represent any sort of ownership interest in another asset, it is the asset.
  - Animats 9y ago
    The SEC's position on the DAO was that they were not going to apply their guidance retroactively to that one. Going forward, though, they're cracking down.
  - joosters 9y ago
    Where did the SEC say the ethereum ICO wasn't a sale of securities?
  - 9y ago

by jMyles 9y ago

yazaddaruvala 9y ago

Imagine a piece of paper. Like what you'd find in a notebook. Those aren't assets right? So now just imagine a token that has the same functionality. You receive a token, it's made of paper like the notebook but does something useful. Should that token, the piece of paper be regulated? Lol yes, it's now money! And all other assets or securities are regulated.

debacle 9y ago
Paper has utility outside of its value. Most coins do not.
- crankylinuxuser 9y ago
  I'd counter specifically with Ethereum or Filecoin. They both represent either computation-time or file-storage-and-bandwidth time. Ethereum could easily represent time on a distributed AWS Lambda. And FileCoin can represent an AWS S3 storage. It just so happens that they both are also cryptocoin. It gets even uglier that the turning-like machine in Ethereum/Solidity also exists, kind of, in Bitcoin. In fact it was because it worked in Bitcoin they developed Ethereum. So technically even Bitcoin can do processing work. Makes everything a bit murkier to be honest.
  - debacle 9y ago
    You're not countering anything. I'm aware of both. The SEC is going to have to decide if these coins having utilities makes up their value. These aren't new concepts. People have been trying to get around regulation for thousands of years.
hobbyjogger 9y ago
Why do you not consider paper to be an asset? Pretty much anything that can be bought and sold is an asset. Yes, that includes notebooks and paper.
gamblor956 9y ago
Your metaphor doesn't make sense. Are you saying that the token lets me write on it and make toy airplanes? Because if so, then the token wouldn't be regulated... If you're saying that the piece of paper represents ownership of something, then the paper is most likely a security or derivative, in which case it is already subject to regulation. A token with the same functionality as this piece of paper would be regulated, and vice versa...

tptacek 9y ago

Which is it? Is it that these tokens aren't really investments, but rather utility instruments people are buying to obtain restaurant reviews? Or is it that it's so unfair that the SEC requires these kinds of companies to register before selling to the public like everyone else? It looks to me like your argument is oscillating a bit.

jMyles 9y ago
Well, the exciting part might be that the line between investment and utility instrument is blurring. It seems to me that these two categories needn't be separated by a bright-line.
- tptacek 9y ago
  A particular instrument might blur the lines in terms of how it's packaged and promoted, but the underlying activities aren't blurry at all. People who acquire an asset in the hopes that its price will rise so they can resell it on a secondary market are speculating ("investing"), full stop. Obviously, this isn't the first time we've had offerings ostensibly taking these forms. People used to buy comic books in the hopes of their appreciation. Ty sold Beanie Babies to people who were stockpiling them for eBay. The reason Ty didn't get in trouble, but Munchee did, was that Ty was never stupid enough to record videos extolling the once-in-a-lifetime opportunity people had to 9x their investment in restaurant review coupons. Again: a very significant component of the SEC's concern is about marketing and promotion.
  - stale2002 9y ago
    Are you arguing that beanie babies and comic books are securities? How about bars of gold? They are certainly speculation. But I doubt the SEC would ever claim that literal bars of gold (not notes, physical bars of gold) are securities.
    - tptacek 9y ago
      They are not, but the reason they are not is instructive.

gamblor956 9y ago

If the coin represents ownership of a resource (or a right to a resource), it can be a security (though it might be a derivative instead, governed by a similar but entirely separate set of rules). Being a security does not mean it can't also be something useful; it just means that the security aspects of it are potentially subject to securities laws. EDIT: Beanie babies aren't securities because you actually the beanie baby. However, a piece of paper entitling you to ownership of a beanie baby could be a security.

michwill 9y ago
All right, but if the coin is inseparable part of the resource, it cannot be a security. There is a thin line here. Imagine a coin securitizing Bitcoin miners ("cloud mining coin"). Yes, that's a security. Now imagine Ethereum. It was ICO'd, talking in today's terms. Is it a security? (hint: SEC just admitted it's not)
- gamblor956 9y ago
  All right, but if the coin is inseparable part of the resource, it cannot be a security. There is a thin line here. True, but then you're limited to things which can be stored in a blockstream in the space allocated to a single coin. There aren't many useful resources that could fit into that space, even fewer that would scale. Now imagine Ethereum. It was ICO'd, talking in today's terms. Is it a security? (hint: SEC just admitted it's not) Unless there is something about Ethereum that I'm not aware of, it does not represent any sort of ownership interest in another asset, it is the asset.
- Animats 9y ago
  The SEC's position on the DAO was that they were not going to apply their guidance retroactively to that one. Going forward, though, they're cracking down.
- joosters 9y ago
  Where did the SEC say the ethereum ICO wasn't a sale of securities?
- 9y ago