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The question is whether a procedure to become a registered exchange of crypto securities exists, and that promise seems to be a lot more dubious. Coinbase does

The question is whether a procedure to become a registered exchange of crypto securities exists, and that promise seems to be a lot more dubious. Coinbase doesn't care if it can offer its customers shares of AAPL or TSLA. They care whether they can start brokering the types of securities that are found on public ledgers.

ceejayoz 3y ago
The process is the same; securities are securities, crypto or otherwise. They don’t like that process, so they’re asking for a special one just for them. The SEC just said no.
- everfree 3y ago
  My understanding is that the corporate framework that securities licenses require is literally impossible to satisfy when trading current public blockchain assets. As in, to trade crypto as a security on your exchange, you would need to walk up to every dev team of every crypto you wanted to trade and kindly ask them to KYC/AML every single user of the blockchain so that you could be in compliance. In practice this just means it's de-facto impossible for any centralized exchange to carry crypto securities.
  - KingOfCoders 3y ago
    "is literally impossible to satisfy" Then you can't be licensed. Simple. "But I really really really want to be licensed" "..."
    - everfree 3y ago
      It doesn't mean that companies can't be licensed. It just means that they will move out of the USA (to another country that has strong financial infrastructure but sane securities laws like the UK), get licensed there, and exclude US customers from their platforms. Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk. So your statement "then you can't be licensed, simple", comes with the corollary of "the USA's strong fintech industry may move entirely offshore within the next decade." If everyone is cool with that, then yeah, go ahead and blanket ban all US residents from trading any financial instrument that's recorded on a public digital ledger.
      - KingOfCoders 3y ago
        "It doesn't mean that companies can't be licensed" Licensed in this discussion obiviously meant the US. "Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk." Which is great for them I guess. "the USA's strong fintech industry" A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore. Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant.
        everfree 3y ago
        > A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore. You'd better be very sure of its irrelevancy before sending it all to the UK, where they're embracing it with a clear regulatory framework. If you are right, the US pushes a small ("irrelevant") amount of crime offshore. But in the off chance you are wrong, the USA risks losing their position as the world's financial superpower. This is not a gamble you want to take if there's even a very small chance that this technology could catch on. > Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant. It gets discussed multiple times per week on Hacker News. It's talked about constantly in congress. It's beginning to polarize people so much that it creates single issue voters in both directions. The word "NFT" has been etched into the public's consciousness as a meme. Banks and central governments are issuing bonds and other paper on public blockchains. The US is itself planning a version of the US dollar with a design inspired by distributed ledger technology. More than 1 in 5 Americans own cryptocurrency now. I don't know what measure of "relevant" you are using, but it's obviously very different from mine.
        KingOfCoders 3y ago
        The "1 in 5" comes from that Coinbase survey or is there any other source? I also own crypto somewhere. I don't use it, I don't sell it, I don't care.
        3y ago
  - ceejayoz 3y ago
    That’s Coinbase’s problem. Similarly, they won’t help you figure out how to insider trade, no matter how nicely you ask. “Please make our illegal business legal, the rules don’t allow it” gets a predictable reception.
    - everfree 3y ago
      If a company can't use a piece of accounting software that's gaining worldwide relevance, that's the company's problem. If an entire country can't use a piece of accounting software that's gaining worldwide relevance, that's the country's problem.
      - ceejayoz 3y ago
        Good luck with that “But we really wanna!” argument in court.
        everfree 3y ago
        I don't really care. I've got a large enough international stock allocation that if the USA loses its status as the financial capital of the world over the next several decades, I'll be just fine in retirement. Companies like Coinbase and a16z have publicly stated their intentions to establish international arms to hedge against the US regulatory environment, and there's no reason my portfolio can't follow their lead.
        butitsFake 3y ago
        [flagged]
        everfree 3y ago
        I've read your comment three times and I've yet to make any sense of it for myself, but good luck to you too. I'm glad you enjoy hunting, growing food, and building things - those are some great hobbies.
      - 3y ago
  - seanhunter 3y ago
    Say your understanding is true. The whole point of regulations is to make various business models impossible. The job of the SEC is to enforce the existing regulations and the job of lawmakers to (maybe) change the regulations if they think it's important to make this type of business possible in the US. In doing so they have to weigh potential benefits and harms caused by doing so. The guiding priciples behind the SEC's current mandate and the current regulatory enforcement framework in the US Securities Laws are 1)investor protection, 2)fair, efficient and orderly markets and 3)capital formation[1]. In making changes to the securities laws, lawmakers would have to decide whether these changes would compromise these principles and whether the benefit of doing so might outweigh the downsides. An impartial observer might look at the crypto markets thus far and decide that they are not (in the main) fair, orderly and efficient and that investors have suffered significant losses due to fraud and other malpractise and decide that it wasn't worth the risk to make changes to facilitate these businesses. That said, the crypto industry has spent a very significant amount lobbying lawmakers so they may decide otherwise. Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible. [1] https://www.sec.gov/about https://www.sec.gov/about
    - everfree 3y ago
      > Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible. I guess that's the job of congress, then. I think the SEC Stabilization Act is an excellent start. There's nothing unreasonable about wanting to broker securities on a public ledger.
      - seanhunter 3y ago
        Well in the normal, boring old securities world broker/dealers don't also get to operate exchanges and offer securities to unqualified investors. I don't think it's the "public ledger" part of this that causes the regulatory issue frankly.
8note 3y ago
Public ledgers? When did the government start running ledgers?
JumpCrisscross 3y ago
> question is whether a procedure to become a registered exchange of crypto securities exists Yes, same as the others. What doesn’t exist is registration per Coinbase’s model of integrated broker, custodian and exchange. We specifically outlawed that in 1934 because it did precisely what crypto did in almost exactly the same time frame in the period stretching from 1918 (post-WWI) through the 20s’ boom years into 1933.

ceejayoz 3y ago

The process is the same; securities are securities, crypto or otherwise. They don’t like that process, so they’re asking for a special one just for them. The SEC just said no.

everfree 3y ago
My understanding is that the corporate framework that securities licenses require is literally impossible to satisfy when trading current public blockchain assets. As in, to trade crypto as a security on your exchange, you would need to walk up to every dev team of every crypto you wanted to trade and kindly ask them to KYC/AML every single user of the blockchain so that you could be in compliance. In practice this just means it's de-facto impossible for any centralized exchange to carry crypto securities.
- KingOfCoders 3y ago
  "is literally impossible to satisfy" Then you can't be licensed. Simple. "But I really really really want to be licensed" "..."
  - everfree 3y ago
    It doesn't mean that companies can't be licensed. It just means that they will move out of the USA (to another country that has strong financial infrastructure but sane securities laws like the UK), get licensed there, and exclude US customers from their platforms. Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk. So your statement "then you can't be licensed, simple", comes with the corollary of "the USA's strong fintech industry may move entirely offshore within the next decade." If everyone is cool with that, then yeah, go ahead and blanket ban all US residents from trading any financial instrument that's recorded on a public digital ledger.
    - KingOfCoders 3y ago
      "It doesn't mean that companies can't be licensed" Licensed in this discussion obiviously meant the US. "Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk." Which is great for them I guess. "the USA's strong fintech industry" A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore. Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant.
      - everfree 3y ago
        > A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore. You'd better be very sure of its irrelevancy before sending it all to the UK, where they're embracing it with a clear regulatory framework. If you are right, the US pushes a small ("irrelevant") amount of crime offshore. But in the off chance you are wrong, the USA risks losing their position as the world's financial superpower. This is not a gamble you want to take if there's even a very small chance that this technology could catch on. > Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant. It gets discussed multiple times per week on Hacker News. It's talked about constantly in congress. It's beginning to polarize people so much that it creates single issue voters in both directions. The word "NFT" has been etched into the public's consciousness as a meme. Banks and central governments are issuing bonds and other paper on public blockchains. The US is itself planning a version of the US dollar with a design inspired by distributed ledger technology. More than 1 in 5 Americans own cryptocurrency now. I don't know what measure of "relevant" you are using, but it's obviously very different from mine.
        KingOfCoders 3y ago
        The "1 in 5" comes from that Coinbase survey or is there any other source? I also own crypto somewhere. I don't use it, I don't sell it, I don't care.
        3y ago
- ceejayoz 3y ago
  That’s Coinbase’s problem. Similarly, they won’t help you figure out how to insider trade, no matter how nicely you ask. “Please make our illegal business legal, the rules don’t allow it” gets a predictable reception.
  - everfree 3y ago
    If a company can't use a piece of accounting software that's gaining worldwide relevance, that's the company's problem. If an entire country can't use a piece of accounting software that's gaining worldwide relevance, that's the country's problem.
    - ceejayoz 3y ago
      Good luck with that “But we really wanna!” argument in court.
      - everfree 3y ago
        I don't really care. I've got a large enough international stock allocation that if the USA loses its status as the financial capital of the world over the next several decades, I'll be just fine in retirement. Companies like Coinbase and a16z have publicly stated their intentions to establish international arms to hedge against the US regulatory environment, and there's no reason my portfolio can't follow their lead.
        butitsFake 3y ago
        [flagged]
        everfree 3y ago
        I've read your comment three times and I've yet to make any sense of it for myself, but good luck to you too. I'm glad you enjoy hunting, growing food, and building things - those are some great hobbies.
    - 3y ago
- seanhunter 3y ago
  Say your understanding is true. The whole point of regulations is to make various business models impossible. The job of the SEC is to enforce the existing regulations and the job of lawmakers to (maybe) change the regulations if they think it's important to make this type of business possible in the US. In doing so they have to weigh potential benefits and harms caused by doing so. The guiding priciples behind the SEC's current mandate and the current regulatory enforcement framework in the US Securities Laws are 1)investor protection, 2)fair, efficient and orderly markets and 3)capital formation[1]. In making changes to the securities laws, lawmakers would have to decide whether these changes would compromise these principles and whether the benefit of doing so might outweigh the downsides. An impartial observer might look at the crypto markets thus far and decide that they are not (in the main) fair, orderly and efficient and that investors have suffered significant losses due to fraud and other malpractise and decide that it wasn't worth the risk to make changes to facilitate these businesses. That said, the crypto industry has spent a very significant amount lobbying lawmakers so they may decide otherwise. Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible. [1] https://www.sec.gov/about https://www.sec.gov/about
  - everfree 3y ago
    > Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible. I guess that's the job of congress, then. I think the SEC Stabilization Act is an excellent start. There's nothing unreasonable about wanting to broker securities on a public ledger.
    - seanhunter 3y ago
      Well in the normal, boring old securities world broker/dealers don't also get to operate exchanges and offer securities to unqualified investors. I don't think it's the "public ledger" part of this that causes the regulatory issue frankly.

8note 3y ago

Public ledgers? When did the government start running ledgers?

JumpCrisscross 3y ago

> question is whether a procedure to become a registered exchange of crypto securities exists Yes, same as the others. What doesn’t exist is registration per Coinbase’s model of integrated broker, custodian and exchange. We specifically outlawed that in 1934 because it did precisely what crypto did in almost exactly the same time frame in the period stretching from 1918 (post-WWI) through the 20s’ boom years into 1933.