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Not disputing this, but does that mean buying forex is a security, and if not, what stops it being? My guess is that foreign governments aren’t counted as 3rd

Not disputing this, but does that mean buying forex is a security, and if not, what stops it being? My guess is that foreign governments aren’t counted as 3rd parties / promoters?

fnordpiglet 4y ago
Forex is not a security because it’s not an investment in an enterprise but an exchange of like for like of legal tender. Otherwise the money changers at airports would be regulated by the SEC and they would have to register their currency exchange, and any international transaction would have to be disclosed and regulated by the sec in literally every single case. Plus the SEC has no authority either of the treasury of the US nor any other governments treasury.
- cdiddy2 4y ago
  so having another country declare a crypto as legal tender makes it no longer a security in the US?
  - klodolph 4y ago
    Feels like the answer to these questions is just gonna be “maybe such a case in the future will make it to the courts, and the courts will have to come up with an interpretation here.” We can make guesses about what the courts will decide but how confident are we in our guesses?
    - cdiddy2 4y ago
      its already the case with el salvador and bitcoin. bitcoin wasn't really under question though for being a security so would need someone to make a smaller token legal tender
  - lxgr 4y ago
    A currency being legal tender presumably has little bearing on whether the U.S. would consider it a currency. Some countries don‘t even have the concept of legal tender, while others recognize currencies they don’t issue themselves. Being issued by a sovereign state would probably be a better test.
    - kyboren 4y ago
      > Being issued by a sovereign state would probably be a better test. Aha, so they just need another layer of indirection. Acting on the imprimatur of the country's central bank, programmatically issue a sovereign CBDC upon the deposit of BTC. Keep cryptographic proof of 100% BTC reserves at all times to provide ultimate credibility for your (potentially parallel) currency (so you can keep using dollars or pesos or whatever in your real economy). Allow intra-CBDC transfers for 0.1% fee and programmatic redemptions for BTC for 0.2%. Profit. `ping -i1 www.bcr.gob.sv`...
    - Xorakios 4y ago
      The economic definition of "legal tender" is sometimes obscured in casual conversation. It isn't "issued by a sovereign state" - that's "fiat" but rather "used for paying taxes." And sometimes, like in the US, debts ("all debts foreign and domestic"). Certainly it has to vary among countries of which I am ignorant, but generally in the Anglosphere it is debts, not payments, that trigger the definition of "legal tender."
  - fsckboy 4y ago
    an argument like that couldn't hurt, but if North Korea declared Apple stock to be legal tender, it wouldn't make Apple stock not a security.
dragonwriter 4y ago
> Not disputing this, but does that mean buying forex is a security, and if not, what stops it being?. I’m not sure the rationale (or if it is just an explicit designation), but forex (and some related derivatives) is commodity trading regulated by the CFTC rather than security trading regulated by the SEC. (I think a regulatory problem with cryptocurrency is that it is generally clearly one or the other, but not always clear which, and while the market would like crypto to be one category it is probably a messy split between the two, absent legislation defining it and assigning it as a category.)
- TylerE 4y ago
  Seems like a fairly clear line can be drawn unambiguously. If it’s, like Bitcoin, just a number in a ledger, it’s a commodity. As soon as you attach any specific data to it, like a smart contract or tieing it to a single, tangible object like a painting, or paying rewards to people who bought before a specified time, it’s no longer fungible. It isn’t a commodity.
  - pa7x1 4y ago
    Confidently wrong. Par for the course in HN.
    - TylerE 4y ago
      Such a detailed rebuttal.
      - pa7x1 4y ago
        There is nothing to rebut. Your argument has nothing to do with Security's laws or the legal jurisprudence around it. It can be substituted by "if it starts with B like Bitcoin, it's not a Security" which contains exactly the same amount of argumentative power. It takes significantly more time to construct a rebuttal than to produce a gish gallop of senseless arguments like the one above. So I will simply refer you to this link: https://isethereumasecurity.com/ https://isethereumasecurity.com/
michael_vo 4y ago
If you just exchange usd for euro that’s not an expectation of profit per se. And no one is taxed for this action. If you’re a day trader of forex usually at the end of the day you would settle back into your default currency. Your gains from this is taxed. But usually when doing this you’re buying derivative products that are explicitly securities with maturity dates.
- lrvick 4y ago
  If you are buying euros as a hedge against USD inflation then you are expecting a potential of profit, or at least lowering losses. Same with precious metals, or Bitcoin.
  - deleted 4y ago
    [deleted]
  - michael_vo 4y ago
    I agree if it’s part of your investment portfolio. The profit part comes when you cash it back into your default currency in order to use it or to realize the gains. If you bought btc, used it to buy goods, and never cashed it back to usd then I think it is a currency.
    - charcircuit 4y ago
      You realize gains when you use another currency to buy something. So if you exchange USD for Euro and then the price of Euro goes up by 5% then when you buy a sandwhich with that money you have to pay taxes on 5% of the price of that sandwhich. Unless you convert your USD to Euro at the time of the transaction buying things with euro can turn into a tax nightmare since you have to keep track of the exact time you purchase something to know the exact exchange rate. If this wasn't the case you could just avoid capital gains by buying something with eulos and reselling it for usd with no profit.
      - Xorakios 4y ago
        In the US the taxable event generally occurs when one currency is converted back to USD, not when a non-USD currency is spent. Real-time conversions do occur and you are absolutely correct it can turn into a tax nightmare when traveling :(
darksaints 4y ago
There is a broad array of explicit exemptions from the Securities Act of 1932. Municipal bonds, for example, are not regulated by the SEC because they are explicitly exempted. Interest bearing bank acceptances or commercial paper with maturities less than 180 days or 270 days respectively are also explicitly exempt. Since coinbase’s offering has no maturity date, and money can be withdrawn at will, my guess is that they are trying to argue that this is an exempt security. TBF, I don’t see much difference between this and a foreign-denominated interest bearing bank account. There’s a lot of crypto==bad posting going on, and I generally agree with the crypto==bad crowd, but this is hardly a clear matter and likely needs to be taken to court to resolve. The SEC has a long history of turf wars with other regulatory agencies and regulatory overreach beyond their congressional authorization. They have lost 4 out of their last 5 Supreme Court cases related to cryptocurrency. I wouldn’t be surprised if their refusal to clarify is because they know they wouldn’t prevail in court and are trying to get away with setting precedent in the court of public opinion. It certainly looks like it’s working, judging by the opinions in this thread.
- pa7x1 4y ago
  Current SEC's position seems to be mostly political posturing by Gary Gensler, and not necessarily based on technical or regulatory merits. There is strong dissent within the SEC with its most recent actions. Most notably by Hester Peirce, one of the 5 SEC commissioners. Something smells afoul at the top of the SEC. You can watch a very interesting recent interview with her here: https://www.youtube.com/watch?v=kvsJM0regpw https://www.youtube.com/watch?v=kvsJM0regpw Or read some of her recent dissents: https://www.sec.gov/news/statement/peirce-statement-kraken-020923 https://www.sec.gov/news/statement/peirce-statement-kraken-0...

Not disputing this, but does that mean buying forex is a security, and if not, what stops it being? My guess is that foreign governments aren’t counted as 3rd parties / promoters?

fnordpiglet 4y ago

Forex is not a security because it’s not an investment in an enterprise but an exchange of like for like of legal tender. Otherwise the money changers at airports would be regulated by the SEC and they would have to register their currency exchange, and any international transaction would have to be disclosed and regulated by the sec in literally every single case. Plus the SEC has no authority either of the treasury of the US nor any other governments treasury.

cdiddy2 4y ago
so having another country declare a crypto as legal tender makes it no longer a security in the US?
- klodolph 4y ago
  Feels like the answer to these questions is just gonna be “maybe such a case in the future will make it to the courts, and the courts will have to come up with an interpretation here.” We can make guesses about what the courts will decide but how confident are we in our guesses?
  - cdiddy2 4y ago
    its already the case with el salvador and bitcoin. bitcoin wasn't really under question though for being a security so would need someone to make a smaller token legal tender
- lxgr 4y ago
  A currency being legal tender presumably has little bearing on whether the U.S. would consider it a currency. Some countries don‘t even have the concept of legal tender, while others recognize currencies they don’t issue themselves. Being issued by a sovereign state would probably be a better test.
  - kyboren 4y ago
    > Being issued by a sovereign state would probably be a better test. Aha, so they just need another layer of indirection. Acting on the imprimatur of the country's central bank, programmatically issue a sovereign CBDC upon the deposit of BTC. Keep cryptographic proof of 100% BTC reserves at all times to provide ultimate credibility for your (potentially parallel) currency (so you can keep using dollars or pesos or whatever in your real economy). Allow intra-CBDC transfers for 0.1% fee and programmatic redemptions for BTC for 0.2%. Profit. `ping -i1 www.bcr.gob.sv`...
  - Xorakios 4y ago
    The economic definition of "legal tender" is sometimes obscured in casual conversation. It isn't "issued by a sovereign state" - that's "fiat" but rather "used for paying taxes." And sometimes, like in the US, debts ("all debts foreign and domestic"). Certainly it has to vary among countries of which I am ignorant, but generally in the Anglosphere it is debts, not payments, that trigger the definition of "legal tender."
- fsckboy 4y ago
  an argument like that couldn't hurt, but if North Korea declared Apple stock to be legal tender, it wouldn't make Apple stock not a security.

dragonwriter 4y ago

> Not disputing this, but does that mean buying forex is a security, and if not, what stops it being?. I’m not sure the rationale (or if it is just an explicit designation), but forex (and some related derivatives) is commodity trading regulated by the CFTC rather than security trading regulated by the SEC. (I think a regulatory problem with cryptocurrency is that it is generally clearly one or the other, but not always clear which, and while the market would like crypto to be one category it is probably a messy split between the two, absent legislation defining it and assigning it as a category.)

TylerE 4y ago
Seems like a fairly clear line can be drawn unambiguously. If it’s, like Bitcoin, just a number in a ledger, it’s a commodity. As soon as you attach any specific data to it, like a smart contract or tieing it to a single, tangible object like a painting, or paying rewards to people who bought before a specified time, it’s no longer fungible. It isn’t a commodity.
- pa7x1 4y ago
  Confidently wrong. Par for the course in HN.
  - TylerE 4y ago
    Such a detailed rebuttal.
    - pa7x1 4y ago
      There is nothing to rebut. Your argument has nothing to do with Security's laws or the legal jurisprudence around it. It can be substituted by "if it starts with B like Bitcoin, it's not a Security" which contains exactly the same amount of argumentative power. It takes significantly more time to construct a rebuttal than to produce a gish gallop of senseless arguments like the one above. So I will simply refer you to this link: https://isethereumasecurity.com/ https://isethereumasecurity.com/

michael_vo 4y ago

If you just exchange usd for euro that’s not an expectation of profit per se. And no one is taxed for this action. If you’re a day trader of forex usually at the end of the day you would settle back into your default currency. Your gains from this is taxed. But usually when doing this you’re buying derivative products that are explicitly securities with maturity dates.

lrvick 4y ago
If you are buying euros as a hedge against USD inflation then you are expecting a potential of profit, or at least lowering losses. Same with precious metals, or Bitcoin.
- deleted 4y ago
  [deleted]
- michael_vo 4y ago
  I agree if it’s part of your investment portfolio. The profit part comes when you cash it back into your default currency in order to use it or to realize the gains. If you bought btc, used it to buy goods, and never cashed it back to usd then I think it is a currency.
  - charcircuit 4y ago
    You realize gains when you use another currency to buy something. So if you exchange USD for Euro and then the price of Euro goes up by 5% then when you buy a sandwhich with that money you have to pay taxes on 5% of the price of that sandwhich. Unless you convert your USD to Euro at the time of the transaction buying things with euro can turn into a tax nightmare since you have to keep track of the exact time you purchase something to know the exact exchange rate. If this wasn't the case you could just avoid capital gains by buying something with eulos and reselling it for usd with no profit.
    - Xorakios 4y ago
      In the US the taxable event generally occurs when one currency is converted back to USD, not when a non-USD currency is spent. Real-time conversions do occur and you are absolutely correct it can turn into a tax nightmare when traveling :(

darksaints 4y ago

There is a broad array of explicit exemptions from the Securities Act of 1932. Municipal bonds, for example, are not regulated by the SEC because they are explicitly exempted. Interest bearing bank acceptances or commercial paper with maturities less than 180 days or 270 days respectively are also explicitly exempt. Since coinbase’s offering has no maturity date, and money can be withdrawn at will, my guess is that they are trying to argue that this is an exempt security. TBF, I don’t see much difference between this and a foreign-denominated interest bearing bank account. There’s a lot of crypto==bad posting going on, and I generally agree with the crypto==bad crowd, but this is hardly a clear matter and likely needs to be taken to court to resolve. The SEC has a long history of turf wars with other regulatory agencies and regulatory overreach beyond their congressional authorization. They have lost 4 out of their last 5 Supreme Court cases related to cryptocurrency. I wouldn’t be surprised if their refusal to clarify is because they know they wouldn’t prevail in court and are trying to get away with setting precedent in the court of public opinion. It certainly looks like it’s working, judging by the opinions in this thread.

pa7x1 4y ago
Current SEC's position seems to be mostly political posturing by Gary Gensler, and not necessarily based on technical or regulatory merits. There is strong dissent within the SEC with its most recent actions. Most notably by Hester Peirce, one of the 5 SEC commissioners. Something smells afoul at the top of the SEC. You can watch a very interesting recent interview with her here: https://www.youtube.com/watch?v=kvsJM0regpw https://www.youtube.com/watch?v=kvsJM0regpw Or read some of her recent dissents: https://www.sec.gov/news/statement/peirce-statement-kraken-020923 https://www.sec.gov/news/statement/peirce-statement-kraken-0...