18 ms·

Statement on Potentially Unlawful Online Platforms for Trading Digital Assets

316 points by matthewbauer 9y ago

Animats 9y ago
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".
- drcode 9y ago
  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."
  - lmkg 9y ago
    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.
    - Qub3d 9y ago
      "Tulips are an excellent investment strategy. As a guy who can sell you tulip bulbs, you can trust me!"
      - drcode 9y ago
        Worked out for the Dutch: They now sell 2/3rds of the world's tulips, and the tulip mania lead to the start of a massive industry.
      - em3rgent0rdr 9y ago
        The whole "Tulip Bubble" myth is overblown. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
  - appstateguy 9y ago
    Regulatory burdens like not using customer's deposit's as a their personal piggy bank? There's good reason for exchanges to be well regulated.
  - Sangermaine 9y ago
    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.
    - figgis 9y ago
      >Libertarians can still form their own exchanges where they are free to be continuously swindled and conned. Would all of this not also remove the ability to create those 'free exchanges'?
      - htormey 9y ago
        Backroom poker games and people sharing copyrighted music they didn’t pay for are still a thing so most likely no. You will still have the ability to start an anonymous exchange, it just wont necessarily be legal in all countries.
        olefoo 9y ago
        And if you're an American citizen; you'd still be legally obligated to report income gains realized by sales through those exchanges.
  - lambda 9y ago
    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.
    - deleted 9y ago
      [deleted]
- saosebastiao 9y ago
  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.
  - nosuchthing 9y ago
    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. https://medium.com/@bitfinexed/latest https://medium.com/@bitfinexed/latest
    - saryant 9y ago
      Isn't Coinbase registered in and regulated by New York State?
      - nosuchthing 9y ago
        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.
    - josu 9y ago
      >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?).
whb07 9y ago
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" Or am i crazy?
- sdhgaiojfsa 9y ago
  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).
  - whb07 9y ago
    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.
    - matthewbauer 9y ago
      Which markets are those? Besides black markets
      - whb07 9y ago
        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.
        semiel 9y ago
        Those aren't securities, though, because their value doesn't depend on the efforts of the seller, which is one of the prongs of the Howey test.
bhouston 9y ago
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.
- ianai 9y ago
  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.
  - JeremyBanks 9y ago
    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.
    - CryptoPunk 9y ago
      >>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.
moonka 9y ago
Does this mean that Coinbase isn't registered but should be? Wonder how this will play out.
- nokcha 9y ago
  Coinbase has been extremely conservative in which digital assets it supports (viz., only Bitcoin, Litecoin, Ethereum, and Bitcoin Cash). None of these are securities.
  - awt 9y ago
    Eth used an ICO.
    - bpicolo 9y ago
      Still not a security as it's not intended as stake in a business
      - Alex3917 9y ago
        > Still not a security as it's not intended as stake in a business What matters is if the expectation of profit comes from the efforts of a promoter or third party, not whether the investment is a share of a business.
      - DINKDINK 9y ago
        When Ethereum ICO'ed it definitely met the Howey test for securities criteria. The SEC even stated that.
        aml183 9y ago
        Where did it say that?
  - deleted 9y ago
    [deleted]
machinecontrol 9y ago
Is this the beginning of exchanges getting shutdown? Does anyone have a list of exchanges that are registered?
Osiris 9y ago
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?
- projmayhem 9y ago
  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.
  - lagadu 9y ago
    This only works for US-based exchanges though.
    - matthewbauer 9y ago
      I think it would be any exchange holding Americans' assets. Note that lots of countries will follow the US lead on this too.
    - pjc50 9y ago
      Tell that to the poker companies. https://en.wikipedia.org/wiki/United_States_v._Scheinberg https://en.wikipedia.org/wiki/United_States_v._Scheinberg
- icebraining 9y ago
  Probably none. Apparently they tend to register as money-transmission services: https://www.ccn.com/sec-chairman-to-testify-they-are-open-to-federal-regulation-of-cryptocurrency-exchanges/ https://www.ccn.com/sec-chairman-to-testify-they-are-open-to...
- matthewbauer 9y ago
  It sounds like Poloniex (Circle) might have made a shady deal with the SEC. They could be the only ones that have though.
oculusthrift 9y ago
makes me think about the circle and poloniex deal that just happened. Polo seems very unlawful to me considering all the shitcoins that are listed.
- xwvvvvwx 9y ago
  Polo / Circle discussed with the SEC before the purchase. SEC provided an exemption from prosecution provided Polo registered as a fully licensed exchange. https://twitter.com/nathanielpopper/status/968202570719117313 https://twitter.com/nathanielpopper/status/96820257071911731...
  - spiralx 9y ago
    Is there any actual evidence for this claim though?
    - xwvvvvwx 9y ago
      I don't know more than that tweet, but I would say Nathaniel Popper is a reasonably reliable source.
philfrasty 9y ago
nice instant BTC drop from $10700 to $9400 following this news...
- g09980 9y ago
  May be more likely due to the Binance "hack." http://markets.businessinsider.com/currencies/news/bitcoin-price-is-plummeting-as-rumors-of-a-binance-hack-swirl-2018-3-1018289038 http://markets.businessinsider.com/currencies/news/bitcoin-p... Edited for clarity.
  - trophycase 9y ago
    Binance wasn't hacked. A bunch of idiots gave their API keys to third party bots. The owner of the bots then hijacked their accounts for profit
    - lmkg 9y ago
      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.
      - benchaney 9y ago
        You're right that it is technically a type of hack, but it isn't Binance that was hacked. It was some Binance users.
  - chisleu 9y ago
    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.
    - ceejayoz 9y ago
      Perhaps. A SQL injection hole could potentially expose API keys, or there could be a vulnerability that lets an attacker add an API key.
TallGuyShort 9y ago
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".
- aje403 9y ago
  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.
  - ballenf 9y ago
    > 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.
    - shmageggy 9y ago
      I fail to see how crypto-speculators making large sums of USD has anything to do with oppressive regimes.
not_that_noob 9y ago
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.
- ivraatiems 9y ago
  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.
  - not_that_noob 9y ago
    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.
    - vkou 9y ago
      Coinbase doesn't trade in ICOs. Bitcoin is probably not a security. Something like tether or filecoin probably is.
- smacktoward 9y ago
  That's not how any of this works. What you're looking at is not a press release, it is what's called "administrative guidance" (https://en.wikipedia.org/wiki/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.
gwatch 9y ago
1) SEC will not be able to enforce regulation on distributed exchanges that are coming. 2) If you stake your coins on Lightning it may come under the purview of some regulation, but difficult to enforce. 3) If you trade on international exchanges, SEC cannot do much. Crypto is censorship resistant after you onboard (convert fiat to crypto) through a regulated exchange. I do not generally read or comment on HN because it is too leftist biased both in articles they post and in the comment section (for my personal taste). I urge anyone to educate themselves further about DEX (distribute exchanges), and how it plays out with KYC/AML (know your customer/anti money laundering) laws.
apo 9y ago
There doesn't appear to be any new information here, and this quote sums it up pretty well: The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not. The SEC has already made its view clear that many ICOs fall under SEC regulatory jurisdiction. For example: https://www.sec.gov/news/testimony/testimony-virtual-currencies-oversight-role-us-securities-and-exchange-commission https://www.sec.gov/news/testimony/testimony-virtual-currenc...
- AlexCoventry 9y ago
  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.
jerkstate 9y ago
sweet, I was looking for a good entry point. Thanks, SEC!
- free2rhyme214 9y ago
  Smart
LAMike 9y ago
What will the SEC do when 0x decentralized exchanges pop up? There are already a dozen in development... pure p2p trading from a hardware wallet... https://0xproject.com/ https://0xproject.com/
- jeffreyrogers 9y ago
  You have to convert USD to some cryptocurrency at some point, and vice-versa, so that's what they'll regulate.
  - cal5k 9y ago
    Yup. It's really quite simple - focus on the USD on-ramps and off-ramps.
    - lagadu 9y ago
      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.
      - vkou 9y ago
        Most non-US banks are really, really, really disinterested in dealing with US citizens, because of the regulatory burdens. Unless you're pushing tens or hundreds of millions of dollars around, they'll probably tell you to go pound sand.
        lagadu 9y ago
        I see, I was unaware of that.
      - JumpCrisscross 9y ago
        > the way around it is fairly simple: use a bank account on another country Willful money laundering isn't a "simple" risk-reward decision.
AbenezerMamo 9y ago
This won't age well with the rise of decentralized exchanges like 0x
- WJW 9y ago
  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)
  - CryptoPunk 9y ago
    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.
nikolay 9y ago
Finally, a sense of reason. These scams should be put to an end! Regulation is an invention of progress, not the opposite!
crypt1d 9y ago
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.
83457 9y ago
Does this apply to digital game item trading/markets at all?
cal5k 9y ago
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.
- deleted 9y ago
  [deleted]
- toomim 9y ago
  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. [1] https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/litigation/investreport/34-81207.pdf
  - cal5k 9y ago
    "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.
ilaksh 9y ago
LOL. I feel like they should be able to distinguish between ICOs and exchanges.
crb002 9y ago
Come to Iowa. Our State legislature made a haven for exchanges that is virtually immune from fraud. https://twitter.com/leerood/status/971445822524190729 https://twitter.com/leerood/status/971445822524190729
7ero 9y ago
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.
vanattab 9y ago
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?
- pembrook 9y ago
  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.
  - deleted 9y ago
    [deleted]
divbit 9y ago
Thank you
- divbit 9y ago
  (life insurance good to go)
  - divbit 9y ago
    but I can't help commenting on a post like this I mean seriously. Earth is such a terrible joke.
bluetwo 9y ago
"I'm not going to live by their rules anymore." -- Phil Connors, Groundhog Day
- IntronExon 9y ago
  That isn’t really an option though, is it? You can live by their rules on the streets, or live with a much more stringent set of rules in prison.
LukaGubo 9y ago
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...
- deleted 9y ago
  [deleted]
kernelPan1c 9y ago
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.
thejerz 9y ago
There's a lot of misinformation here about US-based laws. Here are the facts: 1. All US based exchanges require FinCen registration 2. Most states require a money transmission license Before choosing an exchange, ask to see their FinCen and state licenses. Coinbase's licenses, for example, are posted publicly: https://www.coinbase.com/legal/licenses https://www.coinbase.com/legal/licenses
tmaly 9y ago
I wonder how they will claim jurisdiction. If it is a foreign ( non US ) located platform, this will be harder to enforce.
flowctrl 9y ago
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.” https://support.bittrex.com/hc/en-us/articles/360001525152-Bittrex-statement-on-the-SEC-s-online-trading-platforms-announcement- https://support.bittrex.com/hc/en-us/articles/360001525152-B... They seem to be prepared to meet the SEC in court to argue that the assets they facilitate trading for are not securities.
ilusion 9y ago
bitcoin just needs to achieve a closed loop economy, and this won't sound as bad
ilkan 9y ago
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?"

316 points by matthewbauer 9y ago

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".

drcode 9y ago
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."
- lmkg 9y ago
  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.
  - Qub3d 9y ago
    "Tulips are an excellent investment strategy. As a guy who can sell you tulip bulbs, you can trust me!"
    - drcode 9y ago
      Worked out for the Dutch: They now sell 2/3rds of the world's tulips, and the tulip mania lead to the start of a massive industry.
    - em3rgent0rdr 9y ago
      The whole "Tulip Bubble" myth is overblown. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
- appstateguy 9y ago
  Regulatory burdens like not using customer's deposit's as a their personal piggy bank? There's good reason for exchanges to be well regulated.
- Sangermaine 9y ago
  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.
  - figgis 9y ago
    >Libertarians can still form their own exchanges where they are free to be continuously swindled and conned. Would all of this not also remove the ability to create those 'free exchanges'?
    - htormey 9y ago
      Backroom poker games and people sharing copyrighted music they didn’t pay for are still a thing so most likely no. You will still have the ability to start an anonymous exchange, it just wont necessarily be legal in all countries.
      - olefoo 9y ago
        And if you're an American citizen; you'd still be legally obligated to report income gains realized by sales through those exchanges.
- lambda 9y ago
  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.
  - deleted 9y ago
    [deleted]
saosebastiao 9y ago
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.
- nosuchthing 9y ago
  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. https://medium.com/@bitfinexed/latest https://medium.com/@bitfinexed/latest
  - saryant 9y ago
    Isn't Coinbase registered in and regulated by New York State?
    - nosuchthing 9y ago
      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.
  - josu 9y ago
    >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?).

whb07 9y ago

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" Or am i crazy?

sdhgaiojfsa 9y ago
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).
- whb07 9y ago
  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.
  - matthewbauer 9y ago
    Which markets are those? Besides black markets
    - whb07 9y ago
      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.
      - semiel 9y ago
        Those aren't securities, though, because their value doesn't depend on the efforts of the seller, which is one of the prongs of the Howey test.

bhouston 9y ago

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.

ianai 9y ago
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.
- JeremyBanks 9y ago
  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.
  - CryptoPunk 9y ago
    >>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.

moonka 9y ago

Does this mean that Coinbase isn't registered but should be? Wonder how this will play out.

nokcha 9y ago
Coinbase has been extremely conservative in which digital assets it supports (viz., only Bitcoin, Litecoin, Ethereum, and Bitcoin Cash). None of these are securities.
- awt 9y ago
  Eth used an ICO.
  - bpicolo 9y ago
    Still not a security as it's not intended as stake in a business
    - Alex3917 9y ago
      > Still not a security as it's not intended as stake in a business What matters is if the expectation of profit comes from the efforts of a promoter or third party, not whether the investment is a share of a business.
    - DINKDINK 9y ago
      When Ethereum ICO'ed it definitely met the Howey test for securities criteria. The SEC even stated that.
      - aml183 9y ago
        Where did it say that?
- deleted 9y ago
  [deleted]

machinecontrol 9y ago

Is this the beginning of exchanges getting shutdown? Does anyone have a list of exchanges that are registered?

Osiris 9y ago

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?

projmayhem 9y ago
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.
- lagadu 9y ago
  This only works for US-based exchanges though.
  - matthewbauer 9y ago
    I think it would be any exchange holding Americans' assets. Note that lots of countries will follow the US lead on this too.
  - pjc50 9y ago
    Tell that to the poker companies. https://en.wikipedia.org/wiki/United_States_v._Scheinberg https://en.wikipedia.org/wiki/United_States_v._Scheinberg
icebraining 9y ago
Probably none. Apparently they tend to register as money-transmission services: https://www.ccn.com/sec-chairman-to-testify-they-are-open-to-federal-regulation-of-cryptocurrency-exchanges/ https://www.ccn.com/sec-chairman-to-testify-they-are-open-to...
matthewbauer 9y ago
It sounds like Poloniex (Circle) might have made a shady deal with the SEC. They could be the only ones that have though.

oculusthrift 9y ago

makes me think about the circle and poloniex deal that just happened. Polo seems very unlawful to me considering all the shitcoins that are listed.

xwvvvvwx 9y ago
Polo / Circle discussed with the SEC before the purchase. SEC provided an exemption from prosecution provided Polo registered as a fully licensed exchange. https://twitter.com/nathanielpopper/status/968202570719117313 https://twitter.com/nathanielpopper/status/96820257071911731...
- spiralx 9y ago
  Is there any actual evidence for this claim though?
  - xwvvvvwx 9y ago
    I don't know more than that tweet, but I would say Nathaniel Popper is a reasonably reliable source.

philfrasty 9y ago

nice instant BTC drop from $10700 to $9400 following this news...

g09980 9y ago
May be more likely due to the Binance "hack." http://markets.businessinsider.com/currencies/news/bitcoin-price-is-plummeting-as-rumors-of-a-binance-hack-swirl-2018-3-1018289038 http://markets.businessinsider.com/currencies/news/bitcoin-p... Edited for clarity.
- trophycase 9y ago
  Binance wasn't hacked. A bunch of idiots gave their API keys to third party bots. The owner of the bots then hijacked their accounts for profit
  - lmkg 9y ago
    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.
    - benchaney 9y ago
      You're right that it is technically a type of hack, but it isn't Binance that was hacked. It was some Binance users.
- chisleu 9y ago
  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.
  - ceejayoz 9y ago
    Perhaps. A SQL injection hole could potentially expose API keys, or there could be a vulnerability that lets an attacker add an API key.

TallGuyShort 9y ago

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".

aje403 9y ago
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.
- ballenf 9y ago
  > 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.
  - shmageggy 9y ago
    I fail to see how crypto-speculators making large sums of USD has anything to do with oppressive regimes.

not_that_noob 9y ago

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.

ivraatiems 9y ago
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.
- not_that_noob 9y ago
  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.
  - vkou 9y ago
    Coinbase doesn't trade in ICOs. Bitcoin is probably not a security. Something like tether or filecoin probably is.
smacktoward 9y ago
That's not how any of this works. What you're looking at is not a press release, it is what's called "administrative guidance" (https://en.wikipedia.org/wiki/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.

gwatch 9y ago

1) SEC will not be able to enforce regulation on distributed exchanges that are coming. 2) If you stake your coins on Lightning it may come under the purview of some regulation, but difficult to enforce. 3) If you trade on international exchanges, SEC cannot do much. Crypto is censorship resistant after you onboard (convert fiat to crypto) through a regulated exchange. I do not generally read or comment on HN because it is too leftist biased both in articles they post and in the comment section (for my personal taste). I urge anyone to educate themselves further about DEX (distribute exchanges), and how it plays out with KYC/AML (know your customer/anti money laundering) laws.

apo 9y ago

There doesn't appear to be any new information here, and this quote sums it up pretty well: The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not. The SEC has already made its view clear that many ICOs fall under SEC regulatory jurisdiction. For example: https://www.sec.gov/news/testimony/testimony-virtual-currencies-oversight-role-us-securities-and-exchange-commission https://www.sec.gov/news/testimony/testimony-virtual-currenc...

AlexCoventry 9y ago
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.

jerkstate 9y ago

sweet, I was looking for a good entry point. Thanks, SEC!

free2rhyme214 9y ago
Smart

LAMike 9y ago

What will the SEC do when 0x decentralized exchanges pop up? There are already a dozen in development... pure p2p trading from a hardware wallet... https://0xproject.com/ https://0xproject.com/

jeffreyrogers 9y ago
You have to convert USD to some cryptocurrency at some point, and vice-versa, so that's what they'll regulate.
- cal5k 9y ago
  Yup. It's really quite simple - focus on the USD on-ramps and off-ramps.
  - lagadu 9y ago
    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.
    - vkou 9y ago
      Most non-US banks are really, really, really disinterested in dealing with US citizens, because of the regulatory burdens. Unless you're pushing tens or hundreds of millions of dollars around, they'll probably tell you to go pound sand.
      - lagadu 9y ago
        I see, I was unaware of that.
    - JumpCrisscross 9y ago
      > the way around it is fairly simple: use a bank account on another country Willful money laundering isn't a "simple" risk-reward decision.

AbenezerMamo 9y ago

This won't age well with the rise of decentralized exchanges like 0x

WJW 9y ago
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)
- CryptoPunk 9y ago
  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.

nikolay 9y ago

Finally, a sense of reason. These scams should be put to an end! Regulation is an invention of progress, not the opposite!

crypt1d 9y ago

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.

83457 9y ago

Does this apply to digital game item trading/markets at all?

cal5k 9y ago

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.

deleted 9y ago
[deleted]
toomim 9y ago
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. [1] https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/litigation/investreport/34-81207.pdf
- cal5k 9y ago
  "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.

ilaksh 9y ago

LOL. I feel like they should be able to distinguish between ICOs and exchanges.

crb002 9y ago

Come to Iowa. Our State legislature made a haven for exchanges that is virtually immune from fraud. https://twitter.com/leerood/status/971445822524190729 https://twitter.com/leerood/status/971445822524190729

7ero 9y ago

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.

vanattab 9y ago

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?

pembrook 9y ago
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.
- deleted 9y ago
  [deleted]

divbit 9y ago

Thank you

divbit 9y ago
(life insurance good to go)
- divbit 9y ago
  but I can't help commenting on a post like this I mean seriously. Earth is such a terrible joke.

bluetwo 9y ago

"I'm not going to live by their rules anymore." -- Phil Connors, Groundhog Day

IntronExon 9y ago
That isn’t really an option though, is it? You can live by their rules on the streets, or live with a much more stringent set of rules in prison.

LukaGubo 9y ago

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...

deleted 9y ago
[deleted]

kernelPan1c 9y ago

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.

thejerz 9y ago

There's a lot of misinformation here about US-based laws. Here are the facts: 1. All US based exchanges require FinCen registration 2. Most states require a money transmission license Before choosing an exchange, ask to see their FinCen and state licenses. Coinbase's licenses, for example, are posted publicly: https://www.coinbase.com/legal/licenses https://www.coinbase.com/legal/licenses

tmaly 9y ago

I wonder how they will claim jurisdiction. If it is a foreign ( non US ) located platform, this will be harder to enforce.

flowctrl 9y ago

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.” https://support.bittrex.com/hc/en-us/articles/360001525152-Bittrex-statement-on-the-SEC-s-online-trading-platforms-announcement- https://support.bittrex.com/hc/en-us/articles/360001525152-B... They seem to be prepared to meet the SEC in court to argue that the assets they facilitate trading for are not securities.

ilusion 9y ago

bitcoin just needs to achieve a closed loop economy, and this won't sound as bad

ilkan 9y ago

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?"