4 ms·

What definition of a security are you using? Neither the dictionary nor the SEC include return in their definitons.

LatteLazy 4y ago
Ummm... The "Howey test": >The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[5] The so-called "Howey test" applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities. https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://www.sec.gov/corpfin/framework-investment-contract-an... There is no "reasonable expectation of profits" from a stable coin right? I should be able to buy it for 1USD and sell it for the same. No more. No less.
- neffo 4y ago
  Hmm, you earn 6% APR on BUSD with Binance Earn. You'd buy 1BUSD with 1USD expecting to withdraw 1.06USD in one year. You hold it because you have a reasonable expectation of profits.
  - LatteLazy 4y ago
    But then the Earn program is the security right? Just holding BUSD gains me nothing, it just sits there. I've seen people argue that Eth is now a security IF you have 32ETH, because you can stake it (stake it yourself, not via a counterparties program) since it moved to Proof of Stake. But that's without involving a counterparty and their program and them defining the return etc, you can just do it.
    - neffo 4y ago
      No counterparty? The Eth network is the counterparty, you're buying a stake in the network, you are diluting everyone's control. And earning a reward.
      - yokem55 4y ago
        One does not automatically earn a return just by staking eth. A validator with a node has to be operated which performs the validation and block proposal functions, and money is only made when those activities are performed. The eth that is deposited is not an investment - it is a bond for good and honest performance of the work. Now, there are services that perform those activities on behalf of others, and some of those arrangements could possibly be labeled as securities, but on it's own, at the base layer, participating in eth's proof of stake system is not a security.
      - LatteLazy 4y ago
        Personally, I really dislike the idea of a decentralised counterparty but for eth I can see the argument at least. Of course, you could make the same argument about mining gold: it's a security because you are taking profit by diluting the overall global gold supply network... But for BUSD, none of this applies: you cannot mine it, control is absolutely with Paxos, and is undiluted and the price is (in theory) fixed.
- ac29 4y ago
  The Howey test is a test for investment contracts, not securities in general. Securities are much broader and can even include things expected to yield a loss (such as negative yield-to-maturity bonds).
  - yokem55 4y ago
    True, but there has to be some kind of limiting definition of 'non-investment security', because otherwise any business offering a 'money back guarantee' when they sell a physical product is selling an unregistered security. Hence it should be a very tall order for the SEC to attempt to label non-investment things as securities.
  - LatteLazy 4y ago
    I am not sure that's accurate. I believe a security is MORE tightly defined than an investment contract: it had to be fungible etc. But I may be wrong and I think most of crypto already fulfils this which is why people default to Howey. I'd be happy to be corrected. Either way, we are sort of stuck on the same core problem: What is a security? The Howey test was made up by SCOTUS. It isn't set in stone. If someone can made a convincing case it's wrong, congress or the courts can change it. The problem is, it is actually hard to come up with a definition that is general, simple and applies to stable coins but not to 1000s of thinks like bricks or cars or concert tickets. That's how we ended up with Howey in the first place. So we either have to admit stable coins aren't securities. Or we have to widen the definition a lot and suddenly the sec also have to regulate all sorts of markets they've never actually touched before. Of course if you know such a definition, I am all ears. I actually think cryptos state as psuedo regulated is the worst of all worlds: good actors and would be investors or users are put off by the chance of politically motivated regulator actions and rampant fraud. But that's a much wider position than "stable coins aren't securities because they don't offer a reasonable expectation of profit"...

Ummm... The "Howey test": >The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[5] The so-called "Howey test" applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities. https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://www.sec.gov/corpfin/framework-investment-contract-an... There is no "reasonable expectation of profits" from a stable coin right? I should be able to buy it for 1USD and sell it for the same. No more. No less.

neffo 4y ago
Hmm, you earn 6% APR on BUSD with Binance Earn. You'd buy 1BUSD with 1USD expecting to withdraw 1.06USD in one year. You hold it because you have a reasonable expectation of profits.
- LatteLazy 4y ago
  But then the Earn program is the security right? Just holding BUSD gains me nothing, it just sits there. I've seen people argue that Eth is now a security IF you have 32ETH, because you can stake it (stake it yourself, not via a counterparties program) since it moved to Proof of Stake. But that's without involving a counterparty and their program and them defining the return etc, you can just do it.
  - neffo 4y ago
    No counterparty? The Eth network is the counterparty, you're buying a stake in the network, you are diluting everyone's control. And earning a reward.
    - yokem55 4y ago
      One does not automatically earn a return just by staking eth. A validator with a node has to be operated which performs the validation and block proposal functions, and money is only made when those activities are performed. The eth that is deposited is not an investment - it is a bond for good and honest performance of the work. Now, there are services that perform those activities on behalf of others, and some of those arrangements could possibly be labeled as securities, but on it's own, at the base layer, participating in eth's proof of stake system is not a security.
    - LatteLazy 4y ago
      Personally, I really dislike the idea of a decentralised counterparty but for eth I can see the argument at least. Of course, you could make the same argument about mining gold: it's a security because you are taking profit by diluting the overall global gold supply network... But for BUSD, none of this applies: you cannot mine it, control is absolutely with Paxos, and is undiluted and the price is (in theory) fixed.
ac29 4y ago
The Howey test is a test for investment contracts, not securities in general. Securities are much broader and can even include things expected to yield a loss (such as negative yield-to-maturity bonds).
- yokem55 4y ago
  True, but there has to be some kind of limiting definition of 'non-investment security', because otherwise any business offering a 'money back guarantee' when they sell a physical product is selling an unregistered security. Hence it should be a very tall order for the SEC to attempt to label non-investment things as securities.
- LatteLazy 4y ago
  I am not sure that's accurate. I believe a security is MORE tightly defined than an investment contract: it had to be fungible etc. But I may be wrong and I think most of crypto already fulfils this which is why people default to Howey. I'd be happy to be corrected. Either way, we are sort of stuck on the same core problem: What is a security? The Howey test was made up by SCOTUS. It isn't set in stone. If someone can made a convincing case it's wrong, congress or the courts can change it. The problem is, it is actually hard to come up with a definition that is general, simple and applies to stable coins but not to 1000s of thinks like bricks or cars or concert tickets. That's how we ended up with Howey in the first place. So we either have to admit stable coins aren't securities. Or we have to widen the definition a lot and suddenly the sec also have to regulate all sorts of markets they've never actually touched before. Of course if you know such a definition, I am all ears. I actually think cryptos state as psuedo regulated is the worst of all worlds: good actors and would be investors or users are put off by the chance of politically motivated regulator actions and rampant fraud. But that's a much wider position than "stable coins aren't securities because they don't offer a reasonable expectation of profit"...