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Why is it so difficult to just recognise crypto currencies as it's own new asset class?

by max_ 3y ago

deleted 3y ago
[deleted]
Barrin92 3y ago
because there's no need to do that. Most cryptocurrencies meet the Howey test which is used to judge if something is a security. It needs to require investment, be a common enterprise, and the expectation of profits. Most cryptocurrencies are just token offering schemes that meet those criteria, a few like Bitcoin can make the case they're not securities. the crypto 'industry' wants a new asset class to avoid scrutiny, don't see much reason to give them one.
- tornato7 3y ago
  Sure, regulate them as securities, but the problem is the SEC has made it nearly impossible to actually register a cryptocurrency as a security. https://policy.paradigm.xyz/writing/secs-path-to-registration-part-i https://policy.paradigm.xyz/writing/secs-path-to-registratio...
  - martin8412 3y ago
    [flagged]
  - Barrin92 3y ago
    Doesn't seem that way to me. all you need to do is to file an S-1. The issue is an entirely different one which is obvious when you look at the case studies in the second post. >"Paragon Coin Inc. (“Paragon”) was a Delaware company that raised $12 million from their 2017 ICO of “PRG Tokens” as part of a scheme to integrate blockchain technology to the cannabis industry." The "PRG Token" is just a share in the company. This is a security you should only be able to buy on a registered exchange. The business obviously failed because blockchain in the cannabis industry is utterly useless, the company went broke, and the actual plan off selling their worthless tokens on a random internet platform didn't work out. So the SEC literally just did its job. None of the companies mentioned on that site has anything resembling an actual business model, the point is merely to defraud public investors on opaque exchanges. In every single case the SEC almost certainly prevented harm being done to the public. This article makes an excellent case for maintaining the status quo.
  - CPLX 3y ago
    It’s trivial to register as a security it’s done countless times a year. The problem is that securities trading is regulated, and the coin base model of playing multiple roles itself is illegal
- max_ 3y ago
  What about the investment of record labels in Music contracts with musicians? If we are to look at the postulates of the Howey test it would probably pass them. I don't see them Trying to force record labels to register with the SEC.
  - ivalm 3y ago
    Because they are not passing those investments to retail? Everyone involved is either (1) accredited investor (2) involved in the running of the business.
  - CPLX 3y ago
    The contracts themselves are not traded directly. If they were they’d obviously be a security. Large record labels do of course have stock in their companies which is a security and is traded.
  - Animats 3y ago
    You can buy shares in music royalties.[1] Those are investments registered with the SEC, and the issuer is an SEC-registered broker/dealer with FINRA regulation and SIPC insurance. Your song portfolio may be a dud, but the company behind this has to account for the money they collect, and people will be held responsible if it goes missing. [1] https://www.songvest.com/how-it-works https://www.songvest.com/how-it-works
    - junofan 3y ago
      The page literally says they aren’t registered. The copy is made to look like they are.
      - Animats 3y ago
        No, they registered their offering. Here are all the documents filed with the SEC.[1] There's a prospectus, and annual reports. [1] https://www.sec.gov/edgar/search/#/q=SONGVEST https://www.sec.gov/edgar/search/#/q=SONGVEST
- max_ 3y ago
  >because there's no need to do that There is actually alot of need. The propositions that Crypto caters for would become worthless if we applied securities laws to them.
  - ivalm 3y ago
    I think having broad disclosure about a thing you’re trying to collect money so that you can make more money is a good thing, even in crypto.
audunw 3y ago
Is that supposed to be sarcastic? If you open that can of worms I think the question will very quickly be whether such an asset class should just be outright banned. To me it’s still an open question if cryptocurrencies are inherently a (distributed) scam. At least the ones based on proof-of-work. Both cash and securities are regulated in a way that ties them to the creation or storage of (real-world) value. Proof-of-work cryptocurrencies ties both the creation and trade of the asset with destruction of value (energy). Which inherently makes them toxic. Regulating cryptocurrencies to become non-toxic might make them de-facto illegal.
- rafaelero 3y ago
  > Both cash and securities are regulated in a way that ties them to the creation or storage of (real-world) value. Did we go back to the gold standard during the writing of this comment? Last time I checked there wasn't any backing of fabricating new dollars except for the sheer trust in the US government.
  - ffhhttt 3y ago
    The ability of the US government to tax any companies or individuals residing in the US seems pretty “real” (more-so than gold anyway..)
    - sshine 3y ago
      Let’s keep it at “real” with the quotation marks. Gold tends to last longer than your average nation state. This is not a problem when the promises of a nation state only need to last as long as the nation state itself.
      - ffhhttt 3y ago
        > Gold tends to last longer than your average nation state. I’m not sure how that’s useful. The capability to produce goods and services seems a whole lot more real to me in terms of value than gold (the value of which would collapse anyway if modern economy did). In theory can have currencies directly backed by oil, wheat or copper if you don’t want fiat for some reason. Would still be more ”real” than gold. > only need to last as long as the nation state itself. 1$ from the 50s is not worth much in the 80s and even less today. Seems like that should be a much bigger concern than the longevity of the state itself.
martin8412 3y ago
Because it's not a different asset class..
Temporary_31337 3y ago
Because they are not. There’s no inherent value so classing them as securities makes a lot of sense- just like derivatives and other financial instruments
can16358p 3y ago
Would tax-sucking regulators and governments who want power to dominate the public want something decentralized and free?
- oblio 3y ago
  > decentralized and free There is no such thing as a free lunch/currency/... Human society is hierarchical because otherwise we have chaos. Or worse, completely self-appointed, unaccountable hierarchies. Human society abhors vacuum.
pavlov 3y ago
Why should they, if they’re just reproducing essential properties of existing asset classes? “Doing X on a slow distributed database” is not a get-out-of-jail ticket if X happens to be already illegal or heavily regulated.
davidgerard 3y ago
Because it's all been reimplementations of extremely well known and understood financial instruments which are regulated for excellent historical reasons. The only technical innovation of cryptocurrencies is that you can now create a new unregistered penny stock at the press of a button and spam the regulators with violations. There's ~7000 equity stocks (you know, just stocks) in the US and there's somewhere >1,000,000 defi tokens. This did not in fact achieve regulatory escape velocity.
JumpCrisscross 3y ago
> Why is it so difficult to just recognise crypto currencies as its own new asset class? Crypto is a dead ringer for 1920s securities fraud. Whether it's a new asset class is irrelevant. It's plagued with the same problems as unregulated securities shilling, which means they will share a common solution.

Why is it so difficult to just recognise crypto currencies as it's own new asset class?

by max_ 3y ago

Why is it so difficult to just recognise crypto currencies as it's own new asset class?

deleted 3y ago

[deleted]

Barrin92 3y ago

because there's no need to do that. Most cryptocurrencies meet the Howey test which is used to judge if something is a security. It needs to require investment, be a common enterprise, and the expectation of profits. Most cryptocurrencies are just token offering schemes that meet those criteria, a few like Bitcoin can make the case they're not securities. the crypto 'industry' wants a new asset class to avoid scrutiny, don't see much reason to give them one.

tornato7 3y ago
Sure, regulate them as securities, but the problem is the SEC has made it nearly impossible to actually register a cryptocurrency as a security. https://policy.paradigm.xyz/writing/secs-path-to-registration-part-i https://policy.paradigm.xyz/writing/secs-path-to-registratio...
- martin8412 3y ago
  [flagged]
- Barrin92 3y ago
  Doesn't seem that way to me. all you need to do is to file an S-1. The issue is an entirely different one which is obvious when you look at the case studies in the second post. >"Paragon Coin Inc. (“Paragon”) was a Delaware company that raised $12 million from their 2017 ICO of “PRG Tokens” as part of a scheme to integrate blockchain technology to the cannabis industry." The "PRG Token" is just a share in the company. This is a security you should only be able to buy on a registered exchange. The business obviously failed because blockchain in the cannabis industry is utterly useless, the company went broke, and the actual plan off selling their worthless tokens on a random internet platform didn't work out. So the SEC literally just did its job. None of the companies mentioned on that site has anything resembling an actual business model, the point is merely to defraud public investors on opaque exchanges. In every single case the SEC almost certainly prevented harm being done to the public. This article makes an excellent case for maintaining the status quo.
- CPLX 3y ago
  It’s trivial to register as a security it’s done countless times a year. The problem is that securities trading is regulated, and the coin base model of playing multiple roles itself is illegal
max_ 3y ago
What about the investment of record labels in Music contracts with musicians? If we are to look at the postulates of the Howey test it would probably pass them. I don't see them Trying to force record labels to register with the SEC.
- ivalm 3y ago
  Because they are not passing those investments to retail? Everyone involved is either (1) accredited investor (2) involved in the running of the business.
- CPLX 3y ago
  The contracts themselves are not traded directly. If they were they’d obviously be a security. Large record labels do of course have stock in their companies which is a security and is traded.
- Animats 3y ago
  You can buy shares in music royalties.[1] Those are investments registered with the SEC, and the issuer is an SEC-registered broker/dealer with FINRA regulation and SIPC insurance. Your song portfolio may be a dud, but the company behind this has to account for the money they collect, and people will be held responsible if it goes missing. [1] https://www.songvest.com/how-it-works https://www.songvest.com/how-it-works
  - junofan 3y ago
    The page literally says they aren’t registered. The copy is made to look like they are.
    - Animats 3y ago
      No, they registered their offering. Here are all the documents filed with the SEC.[1] There's a prospectus, and annual reports. [1] https://www.sec.gov/edgar/search/#/q=SONGVEST https://www.sec.gov/edgar/search/#/q=SONGVEST
max_ 3y ago
>because there's no need to do that There is actually alot of need. The propositions that Crypto caters for would become worthless if we applied securities laws to them.
- ivalm 3y ago
  I think having broad disclosure about a thing you’re trying to collect money so that you can make more money is a good thing, even in crypto.

audunw 3y ago

Is that supposed to be sarcastic? If you open that can of worms I think the question will very quickly be whether such an asset class should just be outright banned. To me it’s still an open question if cryptocurrencies are inherently a (distributed) scam. At least the ones based on proof-of-work. Both cash and securities are regulated in a way that ties them to the creation or storage of (real-world) value. Proof-of-work cryptocurrencies ties both the creation and trade of the asset with destruction of value (energy). Which inherently makes them toxic. Regulating cryptocurrencies to become non-toxic might make them de-facto illegal.

rafaelero 3y ago
> Both cash and securities are regulated in a way that ties them to the creation or storage of (real-world) value. Did we go back to the gold standard during the writing of this comment? Last time I checked there wasn't any backing of fabricating new dollars except for the sheer trust in the US government.
- ffhhttt 3y ago
  The ability of the US government to tax any companies or individuals residing in the US seems pretty “real” (more-so than gold anyway..)
  - sshine 3y ago
    Let’s keep it at “real” with the quotation marks. Gold tends to last longer than your average nation state. This is not a problem when the promises of a nation state only need to last as long as the nation state itself.
    - ffhhttt 3y ago
      > Gold tends to last longer than your average nation state. I’m not sure how that’s useful. The capability to produce goods and services seems a whole lot more real to me in terms of value than gold (the value of which would collapse anyway if modern economy did). In theory can have currencies directly backed by oil, wheat or copper if you don’t want fiat for some reason. Would still be more ”real” than gold. > only need to last as long as the nation state itself. 1$ from the 50s is not worth much in the 80s and even less today. Seems like that should be a much bigger concern than the longevity of the state itself.

martin8412 3y ago

Because it's not a different asset class..

Temporary_31337 3y ago

Because they are not. There’s no inherent value so classing them as securities makes a lot of sense- just like derivatives and other financial instruments

can16358p 3y ago

Would tax-sucking regulators and governments who want power to dominate the public want something decentralized and free?

oblio 3y ago
> decentralized and free There is no such thing as a free lunch/currency/... Human society is hierarchical because otherwise we have chaos. Or worse, completely self-appointed, unaccountable hierarchies. Human society abhors vacuum.

pavlov 3y ago

Why should they, if they’re just reproducing essential properties of existing asset classes? “Doing X on a slow distributed database” is not a get-out-of-jail ticket if X happens to be already illegal or heavily regulated.

davidgerard 3y ago

Because it's all been reimplementations of extremely well known and understood financial instruments which are regulated for excellent historical reasons. The only technical innovation of cryptocurrencies is that you can now create a new unregistered penny stock at the press of a button and spam the regulators with violations. There's ~7000 equity stocks (you know, just stocks) in the US and there's somewhere >1,000,000 defi tokens. This did not in fact achieve regulatory escape velocity.

JumpCrisscross 3y ago

> Why is it so difficult to just recognise crypto currencies as its own new asset class? Crypto is a dead ringer for 1920s securities fraud. Whether it's a new asset class is irrelevant. It's plagued with the same problems as unregulated securities shilling, which means they will share a common solution.