If you look up the definitions of "security", "financial instrument", "commodity", and "currency", it is pretty clear that a plain vanilla crypto-currency like Bitcoin is no ordinary security nor a financial instrument. It is not a claim on something else, even less so than a traditional bank note. It is more like a commodity. Since when is "aluminum" a security?
A crypto currency business however may be engaged in trading of crypto currencies which are negotiable financial instruments, and a stable coin that is a claim on a traditional currency is an example of that. A stable coin bears a direct relationship to a bank note. It is a claim on something else. It is not really an investment though, so not much of a security.
And then of course there are more creative negotiable financial instruments which are definitely securities. Options, derivatives, swaps, futures, and the like.
The Supreme Court has a broader definition of securities, that involves a promoted investment in a "common enterprise", but it is unclear that a commodity currency really is a common enterprise like a corporation is for example. It seems unlikely to me that Bitcoin as such would even meet that definition of a security. But other products offered by crypto currency exchanges might.
SEC isn't suing Coinbase over Bitcoin. They're suing under two things:
1. Unregistered exchange for several tokens the SEC believes are securities:
> This includes, but is not limited to, the units of each of the crypto asset securities further described below—with trading symbols SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO—(the “Crypto Asset Securities”).
2. Unregistered sale of securities related to the staking program for XTZ, ETH, ATOM, ADA, SOL. This in particular has a full, point-by-point rationale for why they are defined as securities under the Howey test (in short, you deposit money, and the terms make clear that it's Coinbase's money at that point, not your money, so definitely an investment; staking involves a common enterprise; and it's clearly advertised as making you money based on Coinbase doing stuff with your investment).
Maybe Coinbase should have listened to its own advisors on how to tailor a prospectus to not meet the Howey test definition of a security... or maybe their advisors didn't do a good job in the first place!
Very good points. People often go a long way to argue against the Howey test. The best example is Howey Co case.
If someone is a lawyer dealing in securities and acting as an advisor I would have expected them to be familiar with the law. Coinbase issuing public statements to SEC “tell us what is a security” were basically a ploy or the lawyers involved were extremely inexperienced.
> Coinbase issuing public statements to SEC “tell us what is a security” were basically a ploy or the lawyers involved were extremely inexperienced.
I take it as a stunt intended shift the layman's perception of Coinbase's legal responsibilities onto the SEC. They're counting on cryptobros using this "SEC won't tell us what's legal" talking point to affect favorable political / legislative change.
But newsflash: government regulators aren't obliged to act as your legal council.
The stance isn’t about whether Howey can be applied literally everywhere
The stance is that applying it to digital tokens as unregistered securities means applying it to other places, like Nike shoes and baseball cards, just because any random individual expected to profit when they bought one
that this framework is not applied everywhere, specifically how congress exempted spot commodities and commodities derivatives from the SEC framework specifically because it was untenable
That there is a difference between a digital commodity and a digital security that is mutually exclusive, but the SEC has provided no way of understanding that distinction, and now has resorted to just arbitrarily claiming random assets are securities in cases against the people that trade those assets, instead of taking up cases against the issuers of those assets and letting those issuers defend themselves or reach a definitive conclusion
That it is impossible to comply if it was applied everywhere, as registered security status inherits tons of unrelated regulations to protect incumbent intermediaries
That the SEC will never achieve congress’ delegated mission of investor protection and only hurt investors
And that actually inconveniencing everyone will put this framework under a constitutional test that the SEC probably needs to avoid, but I’m all the SEC going after the entire sneaker trading ecosystem as unregistered broker dealers as fallout to their crusade just to prove they aren’t just trying to debilitate crypto
They wouldn't. 'yieldcrv is not demonstrating knowledge of the Howey test, and appears to be heavily focused on a narrower reading, "buying something with the expectation of increased future value" -- which they're setting up as a strawman's Howey's test.
Sneakers would not meet the Howey Test: An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."
The four parts of the Howey test, distilled down to plain English (and therefore losing a great deal of nuance in the process):
- It is an investment of money.
- The investment is in a common enterprise.
- There is an expectation of profits.
- The expectation of profits is solely from the efforts of the promoter or a third party.
Buying the latest Yeezy's is not a common enterprise. The fourth point is debatable.
that’s an interesting use of strawman to invalidate the observation
The howey test doesn’t need all prongs satisfied and avoidance is based on probability only
The SEC and securities industry has enjoyed a symbiosis for 70 years, where things that blurred the lines didnt exist, were never imagined, or were never challenged. Challenging one challenges them all.
> Why would a sneaker fall under the terms they're using to define a security
because the sneaker trade market focuses on sneakers that are released with artificial scarcity, where many participants in that market buy with an investment of money, with a reliance on the issuer and others to keep them scarce and valuable and promote them, with an expectation of profit.
the SEC is basically saying if any random person has an expectation of profit guiding their purchase at any time, the entire asset and all transactions is a security and everyone that is trading it needs to be a registered broker dealer or registered promoter, and then even if they could be registered they would not be allowed to trade unregistered securities, or even registered esoteric securities like shoes and digital commodity units because the Self Regulatory Organizations are too permissioned for shares and bonds exclusively.
> if not every digital token does?
that's the point. there is either a way where a digital asset is exclusively a commodity, or there isn't at all and every corporate controlled unnatural commodity inherits the same regulatory framework that the SEC is trying to impose on digital assets and the entire trading ecosystem.
like I wrote, the staking program has a different evaluation and my post was not about that. we agree that any asset can be transferred in a way that is a securities transaction.
Has Gensler never consulted lawyers on the status of ethereum prior to this hearing?
It should be easy yes or no from the lawyers, I'm hearing that the law is incredibly clear and not really prone to misinterpretation so it shouldn't be an issue. Or maybe Gensler's lawyers are "extremely inexperienced" if they couldn't figure out such an obvious issue?
You're not answering the question. Why do you think Gensler in official capacity should just dispense one-off soundbite determinations at the request of some clown grilling him?
> It should be easy yes or no from the lawyers...
When has that ever been the case, and why should it be the case now?
[edit] The law is not just what's written but the entirely of case law. The SEC has provided a framework for analysis of securities in the context of crypto. It's here. [1] And it builds on the DAO report, here. [2]
It is not at all surprising to me that he would refuse to answer the question, but the precise reason he is doing that is so that the SEC has freedom of movement to regulate without being pinned down by public statements he has made in front of congress. But that entire notion belies the idea that the regulations are super clear or predictable. The whole reason for this kind of maneuver is because the regulations are not clear or predictable.
I have no doubt he has discussed the status of ethereum with SEC lawyers before.
> It is not at all surprising to me that he would refuse to answer the question, but the precise reason he is doing that is so that the SEC has freedom of movement to regulate without being pinned down by public statements he has made in front of congress.
Because they're a legal body and what they say off hand is precedent, so of course they have to be measured and thoughtful. This was a shameful display, but not by Gensler.
> I have no doubt he has discussed the status of ethereum with SEC lawyers before.
Me too, but again, I refer you to the DAO Report and the Framework for “Investment Contract” Analysis
of Digital Assets
> But that entire notion belies the idea that the regulations are super clear or predictable. The whole reason for this kind of maneuver is because the regulations are not clear or predictable.
They're quite clear, and the whole reason for this kind of maneuver is showboating and pandering. Based on this thread it seems to be working.
In a similar vein I'm confident that Brian and his attorneys have spoken and concluded that they're almost 100% certain to be securities, and for that reason, they chose to avoid working with the SEC at all costs at every point along the way. But of course that determination would undermine the business, so off to court we go.
> Why do you think Gensler in official capacity should just dispense one-off soundbite determinations at the request of some clown grilling him?
Because the whole point of the rule of law is that the law same law applies to any clown. If the head of securities law in the country can't tell you whether a basic thing is legal or not then why even bother having a congress and elections and any pretense that we live in something other than a corrupt oligarchy?
> [edit] The law is not just what's written but the entirely of case law. The SEC has provided a framework for analysis of securities in the context of crypto. It's here. [1] And it builds on the DAO report, here. [2]
If the SEC themselves is incapable of applying their framework to the second-most-prominent entry in the category of things it's designed to analyse, then what is that framework good for?
> Because the whole point of the rule of law is that the law same law applies to any clown. If the head of securities law in the country can't tell you whether a basic thing is legal or not then why even bother having a congress and elections and any pretense that we live in something other than a corrupt oligarchy?
In the linked video the questioner is asking about about potential future cases/decisions and one reason not to comment on specific cases/decisions, as is what happened in the video[0], is that an agency does not want to telegraph their moves ahead of time, since that would give potential criminals a heads up that they are on a deadline and need to focus on cover up their crimes.
If the questioner needs insight into how policing actions are decided they can ask about pervious cases/decisions and the reasoning that went into those pervious cases/decisions.
> In the linked video the questioner is asking about about potential future cases/decisions and one reason not to comment on specific cases/decisions, as is what happened in the video[0], is that an agency does not want to telegraph their moves ahead of time, since that would give potential criminals a heads up that they are on a deadline and need to focus on cover up their crimes.
That's putting the cart before the horse. Catching criminals is supposed to be a means to an end; compliance with the law is supposed to be the end, and getting people to voluntarily stop doing crimes is a win. "We can't tell people what the law is because then they might stop breaking it" is absurd policy.
> If the questioner needs insight into how policing actions are decided they can ask about pervious cases/decisions and the reasoning that went into those pervious cases/decisions.
The whole reason people are arguing about this stuff is that there are no clear precedents (or there are multiple contradictory ones); crypto is similar to a lot of things but not exactly the same as any of them.
> That's putting the cart before the horse. Catching criminals is supposed to be a means to an end; compliance with the law is supposed to be the end, and getting people to voluntarily stop doing crimes is a win. "We can't tell people what the law is because then they might stop breaking it" is absurd policy.
The questioner was not asking about what the law was. They were asking a future potential case or enforcement action.
The questioner in the video could have asked about the law and the details and how it has historically been enforced. They did not though. If they did and questions were still dodged then I might agree with what you are putting out here. At the very least I would think the answerer is not well versed on the topic at hand, but I would want the answer to be straight forward with that.
> The whole reason people are arguing about this stuff is that there are no clear precedents (or there are multiple contradictory ones); crypto is similar to a lot of things but not exactly the same as any of them.
I do not know about that. I think the majority of new crypto coins that have made it into the ads I see are scams, probably because the ones that are scams push for advertisement more. Of those they seem to fall into pyramid scheme and obvious security that would probably run foul of other laws as well. In these cases if a lawyer is not giving a clear answer then you need to hire a new lawyer.
Outside the obvious scams I assume there are people who are at best skirting the law at best and some are turning a blind eye, pretending the law is confusing on the topic when it is really not.
So far it seems like the SEC is ruling and enforcing the above cases, clear cut cases. If you have a part of the current enforcement that is on something that is ambiguous rather than pretty clear cut then I would be interested what makes it ambiguous and potentially reading more into it.
> So far it seems like the SEC is ruling and enforcing the above cases, clear cut cases. If you have a part of the current enforcement that is on something that is ambiguous rather than pretty clear cut then I would be interested what makes it ambiguous and potentially reading more into it.
This article is in significant part about the SEC going after Coinbase, which made a significant effort to stay on the right side of the rules and only allow crypto tokens that operated in ways that are closely analogous to e.g. frequent flier miles. They wrote a great many blog posts giving their perspective and calling for regulatory clarity.
> ... which made a significant effort to stay on the right side of the rules and only allow crypto tokens that operated in ways that are closely analogous to e.g. frequent flier miles.
They list ICOs by the fistful.
I sorted alphabetically and only had to go as far as AAVE to find the first obviously-a-security.
They really didn't try and stay on the right side of anything.
Frequent flyer miles are generally considered to fall under the IRS rebate rule. They're considered rebates on purchases. There's no investment of money (they're a rebate on a purchase), there's no common enterprise, there's no expectation of profit derived from the efforts of others (after all airlines generally devalue miles 10-20% year over year). It fails all prongs of the Howey test. Not to mention you don't own your frequent flyer miles, the airline program does.
If you find me a crypto token that operates 'like a frequent flyer mile' I'll happily tell you why you didn't.
> They wrote a great many blog posts giving their perspective and calling for regulatory clarity.
They wrote a lot of blog posts, I'll give you that. They have regulatory clarity, they just don't like it. [1, 2, lots of case law].
> There's no investment of money (they're a rebate on a purchase)
Seems pretty dubious when there are well-documented cases of the miles being worth a lot more than the purchase (from the famous pudding guy onwards). Hell, mine explicitly advertises the option to "buy miles".
> there's no common enterprise, there's no expectation of profit derived from the efforts of others
Miles become more or less valuable depending on how well the airline is doing, exactly like how these tokens tend to go.
> Not to mention you don't own your frequent flyer miles, the airline program does.
The whole point of Howey is that the details of the ownership structure don't matter, the overall economic effect is what does.
> Miles become more or less valuable depending on how well the airline is doing, exactly like how these tokens tend to go.
You can sell your token in this case right, but you can not sell the airline miles, not in the rule/tos of the miles program, at least that is my understanding.
>> Not to mention you don't own your frequent flyer miles, the airline program does.
>The whole point of Howey is that the details of the ownership structure don't matter, the overall economic effect is what does.
This does not seem the structure or details of ownership, it is flat out whether you own the miles or not.
If you have an example of token that acted more like an airline miles and there is an action against it or because of it I am interested to read more about that token and SEC reasoning.
> You can sell your token in this case right, but you can not sell the airline miles, not in the rule/tos of the miles program, at least that is my understanding.
There may notionally be a rule against it, but you certainly can - my airline will let you transfer them (for a fee in miles) and they certainly know or should know that buying and selling happens.
> This does not seem the structure or details of ownership, it is flat out whether you own the miles or not.
You're the beneficiary of them and have contractual rights to them, whether they're notionally held by some other party or not. If anything the idea that you don't own them makes the argument for it being a security stronger.
>an agency does not want to telegraph their moves ahead of time, since that would give potential criminals a heads up that they are on a deadline and need to focus on cover up their crimes.
I think you might mean the "potential suspects" of the investigation.
"Criminal" as a basic categorization is binary in nature. All non-criminals are also "potential criminals." No criminals are "potential criminals" (they've already realized said potential).
"The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value."
I think it is plausible that all pure staking initiatives will go. I don’t think you have much of an argument here but I could be wrong. It will definitely be an interesting case to watch.
> investment of money in a common enterprise with profits to come solely from the efforts of others
This is where I see the "staking makes a cryptocurrency a security" fall apart. There are a handful of definitions for "staking" and some of them definitely meet the criteria of "a common enterprise with profits to come solely from the efforts of others" however many do not.
1. Ethereum's staking at a protocol level requires you to run a staking node and you are paid for what is basically an SLA between you and the network and you only get paid if your node maintains a certain uptime, is kept up to date, and operates correctly. That I don't believe meets the criteria as it requires direct, sustained effort from you the operator (even if it's generally low effort).
2. Cardano's (or Tezos') staking is similar. Stake pool operators are effectively the same as Ethereum's stake node operators. But even delegators (who aren't required to stay online) still provide a service in that they are picking the stake pools who then fill the SLAs. If they pick pools that can't meet the requirements then the delegators don't get paid until they can find one that does.
3. Meanwhile you have networks like Algorand where participation in consensus does not effect staking rewards and you never have to perform a service to get paid out by the network. Those would meet the criteria by my understanding.
4. And then you have all the DeFi "staking" which is better described as lending or liquidity pooling. You aren't doing anything proof of stake related but are just lending out capital as an investment.
I can't speak on other networks but generally I found that networks fell into one of those 4 categories. The first two only pay people who provide a service back to the network while with those like the third, even if you can provide a service back to the network, you aren't required to to be able to get paid. And then the fourth category is just a security outright.
Edit (because I forgot to mention it): With regards to Coinbase's staking program, it's in a weird spot. With those you aren't directly staking but you are outsourcing the responsibility to a 3rd part (coinbase) to stake for you. I wouldn't be opposed to considering this type of custodial staking as meeting the criteria to be a security but I don't think proof of stake at a protocol level constitutes "a common enterprise with profits to come solely from the efforts of others" as they require work on behalf of the participants to get paid out.
It was however an ICO does not make it inherently a security. Per the SEC:
ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws.
And I think it's ultimately up to the courts (unless the SEC eventually gives a definitive answer) to determine what specific qualities make an token offered via ICO into a security, especially because what qualifies as an ICO really kinda varies and how they are structured also really widely varies.
Which is weird. In my humble layman's opinion, an ICO looks an awful lot like a security offering, while a staking protocol doesn't.
Compare the simplified statements "Buy my token! It's going to be great in the future!" with "Let's pool our money and execute an agreed-upon protocol where those who have the most get more". Why is the SEC wasting time by going after all the weird ones before the easy pickings?
Yes, I think a reasonable position would be that if you perform staking by self-hosting then you're providing a service. An example is getting paid for running a machine on the Ethereum network.
If you pay money in now and get more money out later, and someone else runs the machines, then it's just a loan.
Then there's a question of where to draw the line with cloud hosting, and I have no opinion about that. Someone will sell a service that's barely on the right side of that line, wherever it is.
Crypto people constantly point to this video as some kind of evidence that the SEC is clueless. Maybe it just doesn't make sense for them to give clear answers in that kind of hearings,or answers related to specific crypto token. Just normal for government officials to cover their own asses primarily and giving specific guidance related to a specific issue at a hearing doesn't just serve them well.
I don't own any crypto [outside of very small curiosity amounts when I was playing with it to figure out how it works years ago] nor do I consider myself a 'crypto person' (only, perhaps, compared to the backdrop of extreme HN negativity around the topic). I just think that people saying 'regulations are perfectly clear' on this issue have not spent that much time dealing with regulators in emerging technology.
> Just normal for government officials to cover their own asses primarily
I agree - I just disagree with people suggesting that the same logic doesn't apply to regulators and their actions.
They want to keep it unclear precisely so they have the ability to maneuver in the future and regulate if they want. That is the exact opposite of the 'super clear' regulations & guidance that GP was suggesting currently exists.
> people saying 'regulations are perfectly clear' on this issue have not spent that much time dealing with regulators in emerging technology
I work in a regulated industry. I have my criticisms of Gensler. And I’ve (separately) profited off crypto.
The regulations for non-Bitcoin exchanges were clear from the start. Nobody liked that clarity. And the regulators spent a few years navel gazing. But the legal advice I got at the start has remained consistent: the operators are putting themselves in jeopardy.
One way to look at it is a generation of boiler room operators moved their pump'n-dump schemes from central securities clearinghouse to crypto ledgers, because they realized what a loophole the Bitcoin exception was. And they brought in enough politicians and celebrities to slow walk promises of updated regulations, and regulators cautiously warned and waited, and here we are, with some bowtied man criticizing the SEC for doing its job precisely in the manner politicians demanded.
In general if you're thinking of doing something in a gray area of federal law or regulations then you can write a formal letter to the competent regulatory agency and request an opinion. But you have to be extremely specific and pose your questions in ways that can be answered with a clear yes or no; you can't expect a useful response to a vague request for clarifications or definitions. If the agency does give you a letter containing a positive opinion then it serves as a nearly ironclad defense against any civil enforcement actions or criminal prosecution. Those opinions can change later for political reasons, but you won't be punished retroactively for actions prior to the change.
It’s not a matter of what tokens are “permissible” but rather what protections market participants get against fraud and instability. There was plenty of opportunity for crypto to actually raise the bar in protecting the consumer and it just never happened.
The SEC provides NO guidance on what is or isn't a security. We have the Howey test to go off of. There is no way to register, no legal way to achieve anything that should be legal in a democratic capitalist society. You just have the threat of an SEC lawsuit on nebulous terms. It's completely fucked up.
Another incredibly important point is the $1 million net worth and $200k income based test for becoming an "accredited investor" is racist, classist, sexist, and evil. People should have the right to invest their money how they see fit. If you want people to sign some kind of disclosure, or some kind of term sheet that makes it very clear to a retail investor what they're getting into, fine. But the law as it exists is outrageously undemocratic.
In regards to the SEC, a system that was built for 1933 is not even relevant in a world where you can spin up a million new tokens in 10 seconds and deploy to 24/7 worldwide markets in 5 minutes from anywhere.
Keeping the 1933 SEC Act in tact in 2023 is like trying to keep Prohibition going even though it's raining whiskey from the sky.
Sounds like you're advocating for Matt Levine's "Certificate of Dumb Investment" proposal. The fact that so many retail investors have been scammed by crypto gives support to the current regime, but I think there's something to Levine's idea.
I think the real crux of the issue is that these instruments were designed to be confusing to regulate and, alas, they're confusing to regulate. The error was in thinking that a confused regulator says "I don't understand what's going on here, carry on and rest easy" rather than what actually happens: "I don't understand what's going on here, and until I do -- on my schedule, not yours -- your business is always at risk of falling on the wrong side of my reasoning."
I don't think the pure commodity coins (layer 1 networks like btc, xch, etc) are confusing at all. You do work and get rewarded with a digital commodity. It’s exactly like digging up gold, or tapping a tree for maple syrup.
Then a bunch of crypto anarchists showed up and started speculating that these coins would be worth a lot in the future because we could topple the financial hegemony by their powers combined. Okay whatever, still commodity trading.
Then we started getting all these fake Ponzi coins that are standing in for something else. That’s a security.
What is possible with e.g. BTC is that it’s easy to trade at scale. A commodity that’s easy to trade isn't a security, but if you squint it kinda looks like one. Regardless, it’s not crypto’s fault that regulators are having a hard time understanding it. That’s the regulators’ and lawmakers' problem. (So elect people into power who are your peers, and who aren't 70 years old and have no hope of anything more than a cursory understanding world from the last 20 years.)
But, of course they’re not going to stand aside while people get scammed. Only the anarchists want that. The rest of us just want crypto to be treated fairly.
I think it's more a case that anyone who was involved in crypto early, and who has actually taken the time to understand the technology, has realised about a decade ago that crypto currencies are mostly useless.
But then people had they idea that they could still make money from it by grifting people if they just added layer upon layer of complexity in order to disguise the ultimate uselessness of the underlying technology. That is where all of your Ponzis, rugpulls, NFTs and everything else comes into the picture.
> I think it's more a case that anyone who was involved in crypto early, and who has actually taken the time to understand the technology, has realised about a decade ago that crypto currencies are mostly useless.
I don't know what it is about crypto that makes HN commentators want to make the most ridiculous, put-downy statements without evidence to back it up.
Crypto is not mostly useless, it is just that people don't like the uses. crypto is absolutely massive for avoiding capital controls in countries with inflation, etc.
> I don't know what it is about crypto that makes HN commentators want to make the most ridiculous, put-downy statements without evidence to back it up.
HN has many people who understand how technology work and a smaller but still large number of people who understand economics. Cryptocurrency has a few people like that but also a ton of get-rich-quick types who think their best work is making random claims until someone buys whatever they’re selling. We’re a decade and a half into that, with billions of dollars of real money pumped in and almost no benefit outside of some early investors being able to cash out before the inevitable dip.
At this point, the onus is on anyone promoting cryptocurrencies to show up front why they’re different than their waves of predecessors. One big challenge here is the inherent conflict of interest: unlike other things which have come in and out of popularity, someone who tries cryptocurrency but realizes it’s not really useful to them doesn’t have an option for getting out without a financial loss which doesn’t involve finding a buyer for something they know isn’t really worth the price. If you backed MongoDB a decade ago, you can just switch to Postgres without either eating a loss or finding someone to buy your old Mongo server.
This also leads me to your next sentence: for years, the claim was that cryptocurrency was going to transform the financial world and beyond. Sales guys went on at length about how you’d use blockchains to buy coffee and a ride to work, make sure the farmer who grew your coffee beans was organic, store your software licenses, record the deed to your house, etc. They couldn’t explain how any of that would work and dismissed criticism, and were especially upset if people said the only real use cases seemed to be illegal transactions. Now, in 2023 we’re back to the primary use being breaking laws, hoping that the government in question chooses not to monitor cryptocurrencies?
> Crypto is not mostly useless, it is just that people don't like the uses. crypto is absolutely massive for avoiding capital controls in countries with inflation, etc.
>Cryptocurrency has a few people like that but also a ton of get-rich-quick types
There are literally hundreds of millions of people who're into cryptocurrencies...and you clearly don't have a clue what kind of people are into it and to what degree. I'd suggest not to make up statements like this if you want your opinion to be taken seriously. FYI bypassing capital controls with cryptos does not necessarily mean "breaking the law". Learn a thing or two if you're going to spout nonsense.
What an elegant description! I completely agree with you. Back in 2013, I looked at the massive number of financial middlemen on Wall Street and thought Bitcoin (or a future blockchain) could help lubricate the system. It took a few years for me to realize that blockchains are fundamentally flawed and cannot compete at scale with other technologies.
> Crypto is not mostly useless, it is just that people don't like the uses
Crypto has legitimate use as a rebel medium. It’s also plagued with criminality. Its promoters had a decade to clean up its act and refuse to self regulate.
That’s soured the public’s mood towards the whole enterprise. If crypto’s benefits are niche, its development should be niche. And if its sole beneficiaries are people in failing foreign countries, it might make sense to put the whole thing under the aegis of State versus continuing to create chaos from the private sector.
This only applies to literally one or two cryptocurrencies, stuff like Monero. They're very much the exception to the rule. Most cryptocurrencies like Bitcoin and Ethereum just publish the entire ledger which is constantly being pulled in by the PLA, the SEC, the FBI and myriad other law enforcement authorities the world over. Not to mention Chainalysis.
If the government that's oppressing you is capable enough to oppress you they're more than capable enough to, in the fullness of time, deanonymize your transactions and send you directly to jail for them. You're not just defending against the current start of the art tech but all future improvements - against an adversary with dramatically more resources than you have.
Illicit transactions on public ledgers are simply prosecution futures. People get jail time constantly for crypto transactions.
If I were a dissident in a country like the PRC hypothetically, I'd run like hell from crypto. Talk about asking for trouble.
That's before we even get to the point of how you plan to acquire these currencies without the government noticing.
They have a use: gambling and speculation at a massive decentralized offshore casino. Coinbase and Kraken are the cage. Binance, for example, and DeFi are the table games.
> crypto is absolutely massive for avoiding capital controls in countries with inflation, etc
etc doing some heavy lifting here. The article is about US-based crypto company. How is your list of massive uses applicable to US specifically? (I actually have sympathy for coinbase for at least trying to follow some rules)
Yes, evading capital controls is illegal, part of the informal economy in large parts of the world, and very helpful to many people.
I also think there are useful legal uses, but yes - where crypto has the best comparative advantage is when people are trying to circumvent harmful laws. Not every country is a (relatively) well-run procedural democracy. Crypto helps people route around that.
> > crypto is absolutely massive for avoiding capital controls in countries with inflation
Inflation hedge means mantaining parity against a weighted basket of stable currencies such as USD/EUR/CHF/JPY. Maybe gold?
Bitcoin didn't mantain parity at all, it's up some 20,000% since 2013 and +∞ since its inception.
So crypto failed as inflation hedge too, because the world of finance is very specific, you can't say 'this asset is an inflation hedge' and then it's up 20,000%
It also failed as a tool for capital controls and tax evasion because if you do that sort of things you don't want publicity...what happened is that crypto-bros and crypto-enthusiast went on to scream off the top of their lungs and it resulted in the death of the largest capital control avoidance use case: getting money out of China.
Nobody uses Crypto for getting money out of China anymore.
> Bitcoin didn't mantain parity at all, it's up some 20,000% since 2013 and +∞ since its inception.
Dai and other stablecoins maintain parity and are what is mostly used.
> It also failed as a tool for capital controls and tax evasion because if you do that sort of things you don't want publicity...what happened is that crypto-bros and crypto-enthusiast went on to scream off the top of their lungs and it resulted in the death of the largest capital control avoidance use case: getting money out of China.
I don't know what to tell you, these are heavily used behind-the-scenes in the dollar black market in places like Argentina, etc.
> Nobody uses Crypto for getting money out of China anymore.
Yeah, the informal economy is not actually very large in China, it's not a good example.
> > Dai and other stablecoins maintain parity and are what is mostly used.
Dai and stablecoins are currencies issued by private companies, if the private company sponsoring it were to disappear, the decentralized and federated (or whatever) community won't be able to support such a huge undertaking.
Besides the whole thing is pointless because whatever authority or control system you are evading with crypto sooner or later you'd have to come back into it, because nobody sells food, water, shelter, houses for crypto. Nor bitcoin nor stablecoins. Actually it's worse because the authorities will be waiting for you at on and off ramps.
Wrong from the jump about Dai, and I don't think you know about how black market cash economies work - there are plenty of informal economy places you can exchange local currency for dollar, dollar for crypto, etc.
Meh, I'm no bull but I also don't think "cryptos are mostly useless" is accurate. I believe there are solid use cases for distributed global ledger and digital replacement for cash. Is Bitcoin the winning/best manifestation? I doubt it, we likely need something much more energy efficient (like Chia is trying to be). But I don't think the idea is bust. It just isn't as overwhelmingly applicable as people dreamed it might be. We're trying out use cases, vetting the good ones and sometimes painfully learning the which ones were stupid or bad ideas. And once all the speculation settles, I do think true currency is still a viable one. Logistics and markets are another, etc.
I think that it's still unproven that a distributed global ledger is actually a fundamentally useful thing, outside of speculation. We're 15 years out from the invention of Bitcoin, and if all of blockchain technology snapped out of existence today, there are very few people, other than speculators, who would be impacted. It has comprehensively failed to be adopted into any value chains.
Which is why I'm extremely long on crypto and patient. It takes more than 15 years to fundamentally change the type of things crypto might really be useful for. And as a currency it's already shown traction, just not ubiquitous adoption. The currency use case requires people to stop creating volatility by hyper speculating with it, so I welcomed the crypto winter. I remember when people bought pizza with bitcoin. It wasn't that long ago, as you point out.
I don't think anyone here is arguing that digital cash or a global ledger is bad they are arguing that the specific structures and incentives of crypto are bad.
Bring on the digital cash IMO but bearer instruments underpinning any large scale finance is a recipe for disaster.
I think people are latching on to the magnitude of your claim rather than the direction and therein missing the point. FWIW, as somebody who meets your criteria, myself and my network of people from that time offer much credence to your claim.
Even back in 2016/17, many people involved were openly bemoaning how 80+% of ICOs were unregistered security offerings to vaporware.
You can almost pinpoint the inflection point at which Coinbase decided their goal was short-term profit maximization vs developing a healthy ecosystem. The company in the last 5 years is completely unrecognizable in contrast to when there were only 3 coins you could buy from them (USDT, BTC, ETH).
Coinbase tried to be the good guy in crypto. They lost money. Then they tried to be the good guy with a sideline in shitcoins. They lost money.
No matter how this case winds up, Coinbase is in a terrible financial position. If you were a Wall Street bank, would you give them financing right now?
But what on earth is a digital commodity? I think the whole concept of digital commodity is nonsensical.
A commodity is a product. Products are either consumed or used as raw materials. A digital commodity is not a product. It can't be consumed or used, because it's entirely imaginary.
I think a better term is "abstract unit of account".
Respectfully, I think your understanding is behind the curve. Even the SEC says BTC itself is a commodity.
You consume a BTC by using/trading it. You consume gold or maple syrup by using/trading it. Just because the uses are a little different doesn't mean it's incompatible with the definition of commodity. If I started using gold in a nonsensical way you wouldn't start saying "oh now it's a security", would you?
I think the hangup with BTC as a commodity is that I can make a loaf of bread with wheat and eat it and the amount of wheat in the world is depleted as a result. Similarly I can use gold to build a cell phone or some jewelry and while it is possible to recover it isn't as simple as trading BTC. How is a BTC consumed?
The majority of gold usage is in investment/central bank reserve. Technology applications are a fraction of the usage. Jewelry is a major usage, however part of the reason for its use in jewelry is a hybrid combination of its store of value properties (ex. in Indian culture afaik, gold jewelry plays a large part in passing down wealth, families gift gold jewelry at weddings etc.).
So you consume bitcoin the same way a central bank consumes gold: by sitting on it, selling it when you need to, or buying more in times of expected turmoil.
Bitcoin is far younger than gold (12 years vs thousands), so its obviously more volatile.
shaping gold into jewelry doesn't consume it. One of the reasons its been currency for 5k years is because you can melt it down and re-use it as coins or other jewelry etc. Gold isn't consumed, for the most part.
Technically the thing you hold and use is a transaction output, and once an unspent transaction output (UTXO) is spent it can't be spent again. So from that perspective it is consumed!
Commodities are usually raw/close-to-raw inputs into some process. Bitcoin doesn’t really meet that, but again the whole point is recent technological innovations haven’t really settled into the language yet.
And again, that is by design of both the instruments themselves and the massive PR campaigns/grifts around them.
The whole trick is attempting to position these things as “the half of the definition of commodity that means this has intrinsic value but not the other half of the definition which says it’s a raw input,” or “the half of the definition of a security that means You Can Make Money, but not the other half that says I can be regulated as someone selling a You Can Make Money instrument.”
This is my read as well. However,I think if you regulate the security like stuff in the same way we regulate existing financial instruments the whole thing collapses anyways, so who really cares what we call this specific coin.
You can consume a Fortnite skin or a Call of Duty weapon.
The point is that you cannot consume crypto, it's a problem which is understood inside the community, that's why the push for NFTs which started as legitimate art to enjoy on huge 8K screens or VR headsets but quickly ended up becoming Twitter avatars built for the purpose of trading and offloading to a bigger fool.
You consume it by trading it or, for a direct analog to your example, by showing off your wallet balance. Your Fortnite skin is no more consumable than a BTC. It just has a different value and use.
Hence the SEC is right to clampdown on crypto for violations of securities law, in order to prevent bubbles that emerge when the only use for something is trading it for something else. We already have that, people who want to participate in that game know where to go, the stock market.
> > for a direct analog to your example, by showing off your wallet balance
1st, you need to read up on how commodities and securities are regulated. 2nd, showing off your wallet balance is the same as showing off your NFT, and NFTs, digital skins, etc. are all obviously consumables.
they literally started bitcoin and were the guys mapping out what they wanted from a digital currency over the previous twenty years, this is well known history
My point is simply that crypto requiring a nuanced legal treatment is not implicitly by design even if it was promoted as a feature early on by grifters and anarchists. It’s a technology like any other and it’s the regulators’ job to create fair and appropriate treatment for it (and our job to elect ones who will).
Bitcoin was literally designed to circumvent state monetary systems and their affiliated controls. Almost all the crypto descendants follow this path as well.
So yes, it was by design that it’s hard to regulate.
First of all, the actual difficulty is not really material since we're debating whether it was a design goal. Bitcoin came out of a long line of libertarian/anarchist projects to circumvent state controls. I don't know why you're pretending like this is some unique interpretation of history. E.g. the problem that the Satoshi whitepaper sets out to solve was (as cited in the whitepaper, source [1] in the footnotes) laid out with this preamble:
> I am fascinated by Tim May's crypto-anarchy. Unlike the communities
traditionally associated with the word "anarchy", in a crypto-anarchy the
government is not temporarily destroyed but permanently forbidden and
permanently unnecessary.
Secondly, a lot of features make it harder to regulate than cash. Off the top of my head, being able to transport it over national borders via the Internet. Storing arbitrarily large amounts of it in zero physical square meters. Keeping it relatively secure without having to rely on third parties (banks) gaining knowledge of your ownership, etc. etc.
Bitcoin isn't any different than cash except it’s got a decentralized public immutable ledger and therefore isn't a bearer currency. But like cash its transactions are not governed by an authoritative financial institution that can repudiate and/or reverse them. (It’s proven effectively easier to regulate than cash on the tracking transactions front, though.)
That’s the “anarchy” the paper refers to.
In the paper, the goal was not to topple governments. It was to build a digital cash equivalent where the payment processing happened in a distributed and ultimately trust-less “anarchist” manner. Thus allowing people to transact as they do in cash, but digitally.
All this anti-regulation no laws style of anarchist stuff is downstream. Sure it’s adjacent, but also easily conflated.
Anyway, to be super clear, being resistant to the rule of law is a very different property than being resistant to centralized control.
Cash is decentralized.
Credit, debit, ACH, are centralized.
Crypto is decentralized.
All are subject to the rule of law. But only centralized transactions can be manipulated without coercion or use of force against a one of the parties involved (if they are unwilling to abide).
I don't know any technology that fundamentally cannot have laws created governing its use. It’s just not possible to prevent someone from legally regulating something. But it is possible to design systems that don't require 3rd parties to mediate transactions and do require an actual authoritative monopoly on violence to manipulate, as we’ve seen with cash and as is the case with BTC.
Care to explain? FWIW I was around when crypto was born and know very well the initial scene and motives. The crypto anarchists showed up pretty quickly, sure, but they weren't the seeds of the technology.
Where the definition gets confusing is when a cryptocurrency gives you voting rights to modify the underlying protocol, or determine the direction of an entity that manages the underlying protocol, etc.
There isn't (AFAIK) a commodity that operates in this manner. Owning a lot of gold doesn't mean that I'm able to unilaterally adjust how gold is mined or obtained, for example.
Or when a cryptocurrency has bizarre rules controlling how it can be traded -- for instance, a number of Ethereum tokens like Safemoon had rules enforcing a "tax" on all transfers, ostensibly to reduce volatility.
The only question here is whether cryptocurrency is a security or a commodity. Securities fall under regulation by the SEC (SECURITIES and Exchange Commission). Commodities are regulated by the CFTC (COMMODITIES Future Trading Commission). SEC Chair Gensler agrees that Bitcoin is a commodity, but thinks everything else is a security.[1] Securities are much more tightly regulated than commodities. The SEC is making it clear with these complaints that they believe certain cryptocurrencies are securities.
A court might disagree. The CFTC could potentially disagree, although yesterday's agreement makes me think they may have given up on that to some extent. But I actually think it's pretty clear that any cryptocurrency project offering a reward for "staking" or similar is a security.
You capitalized the wrong word. The CFTC is the Commodities FUTURES Trading Commission. After all, a commodity is defined as anything traded with a futures contract (except for onions and movie tickets)!
A whole lot of things that aren't commodities in common parlance are within the jurisdiction of the CFTC because they are traded with futures contracts. This includes some securities. A whole lot of things that are commodities in common parlance are not within its jurisdiction, as the CFTC only deals with futures contracts.
Orange juice concentrate is a commodity by any definition. The CFTC regulates futures contracts on orange juice concentrate. It does not regulate its production, sale, transportation, or anything else unrelated to futures contracts. That is the job of the USDA, FDA, DoT, and so forth.
Stocks are securities. As they are traded with futures contracts, they are also commodities. The CFTC regulates futures contracts on securities jointly with the SEC. It does not regulate any trading of securities that does not involve futures contracts. That is the job of the SEC. The fact that people trade stocks with futures has never hampered the SEC's efforts to regulate them.
Curious: is "bitcoin" being used by the SEC as a general term to mean "all cryptos that fundamentally employ a work-based consensus algorithm", or "pure" cryptos or whatever? Or is it not yet clear to the SEC that there are more instances of Nakamoto consensus networks out there and not everything other than BTC is a security?
I agree that staked projects and derivative projects are securities since they are fundamentally a representation of or proxy for the actual thing of value, BTC, XCH, formerly ETH, etc.
Of course not everything other than bitcoin is a security. My private blockchain no one knows about is not a security. It's not a universal law of the universe.
What they mean is every coin/token they looked at. If asked to evaluate litecoin for example probably they'd say it's not a security as well. They don't need to pass judgement on each of the thousands of coins individually because definitions and common sense exists.
I’m just trying to understand the context. I hope it is as you say and it would be my baseline assumption that it is as well. But it’s not unquestionably obvious given history and what relatively little context is present in this thread. The SEC used to think all crypto is a security to the point where honest miners are instructed to declare blockchain rewards as income (I have, and TurboTax even asks you if you acquired crypto in the last year with no nuance as to how you acquired it or which one you acquired). It may be obvious to you and me but my question was more about how far the SEC’s understanding has evolved.
Commodities have real-world uses (e.g. gold, oil, frozen orange juice), securities represent a claim on some productive enterprise. Cryptocurrency is neither.
Gambling happens in real world markets as well, but that doesn't mean that real world markets are casinos.
Beaniebabies were effectively regulated and taxed like commodities. Commodities do not require a real-world use. All they are are tradable non-currency things which can result in capital gains.
The speculative (HODL!!) cryptocurrencies should probably be treated like commodities, and regulated as such by the CFTC. The cryptocurrencies that are actually being used like currencies (e.g. actually used to buy things) should be regulated like foreign currencies, which would also be regulated by the CFTC (this is essentially the same exact thing as Commodities trading, but with simpler accounting rules which reflect the much higher liquidity, divisibility, and likelyhood that a unit changes hands). Neither of these scenarios involve the SEC. The SEC should only be involved when coins are being issued like securities (e.g. as a way to raise funding and sell financial stakes in some kind of enterprise).
Collectibles are just a subclass of Commodities which can't be taxed using Mark To Market rules, but there are a whole host of commodities which are just like that. Precious metals, rare coins, cards, comics, etc., are all collectibles, but they are still commodities for regulatory purposes. For example, here is PR release of a CFTC enforcement action against some fraudulent coin dealers: https://www.cftc.gov/PressRoom/PressReleases/8694-23
IIRC, the IRS and CFTC have already issued rules to treat NFTs as collectibles.
That could change in a second if another agency like the SEC decides it's something else. There is nothing to say that two agencies couldn't hold conflicting positions over what BTC is or isn't.
Binance was up for “money laundering and tax offenses” issues because they deal with large sums of fiat money independent from what’s being sold. Replace Bitcoin with physical artwork and you can still run into issues here.
Coinbase similarly ran into issues not because they were selling crypto but from related activities which fall under SEC regulations. It’s one thing to operate an auction selling pigs or crypto, but when you start getting into ‘related activities’ they don’t necessarily fall under the same umbrella. Read up on “Pork Bellies” and you might start to understand the issues.
This is a slightly incorrect interpretation. Not all financial instruments are securities. Financial instruments are legal contracts between an issuer and one or more holders + other parties. If you own any stock in a company, you don’t own part of that company… what you own is a portion of a legal contract that defines what rights you have as a shareholder and what obligations the issuer has.
Currency isn’t a commodity. It’s treated as a commodity because they shares characteristics - you can buy and sell them over FX market. It’s a bit of an oddity because its value isn’t solely based on supply and demand, but stability and existence of a central authority controlling its supply.
(Opinion) Bitcoin, on the other hand, is a virtual Commodity. It is not recognized as a currency. Similarly, gold is a commodity but not a currency, though it does have a place as a non-standard currency in ISO-4217.
Commodities can be hedged against (oil futures) through derivative products. Those are formalized through a legal contract.
Your notion of a financial instrument doesn’t cover the fact that it is the legal contract involving money that makes it an instrument.
But as others have pointed out that’s not why the SEC is suing.
Seems obvious that Bitcoin shouldn't be unregulated and that there should be no question of which regulator has jurisdiction. Unfortunately that probably needs Congress to act.
Gold is a commodity because it exists in the real world and you make it. Bitcoins aren't a commodity because a random person or entity has created it with the intention of selling it to people as a financial instrument.
You can't issue more gold. And to pre-empt your inevitable reply: the limited supply of bitcoins is not equivalent because Apple also has limited amounts of stock. Doesn't make it a commodity.
>If you look up the definitions of "security", "financial instrument", "commodity", and "currency", it is pretty clear that a plain vanilla crypto-currency like Bitcoin is no ordinary security nor a financial instrument. It is not a claim on something else, even less so than a traditional bank note. It is more like a commodity. Since when is "aluminum" a security?
It's a financial instrument. A commodity is used to make or do something. Crypto currencies are literally just money making devices. Sure they call themselves currencies, but that's not their primary purpose. They're investment vehicles. Even the limited ability to trade them for goods an services doesn't get around this fact. It's like being paid in stock. That's how they're marketed. Not as a way to buy takeout, but rather get rich.
Gold is not a currency, it is a commodity that is similar enough to a currency (meaning it can substitute as a currency). ISO 4217 includes precious metals that it explicitly states are not currencies.
Currencies do not exist outside a monetary system. If I sell you something, and accept skittles as payment, that does not make skittles a currency.
It’s kind of interesting that the “commonwealth” countries (AU/NZ/GB/CA) have different classifications of crypto (AU/NZ treat them as property, CA as securities, GB varies depending on the thing).
The SEC filings do give the rationale for why specific coins are securities though.
Hard to summarize each filing though. Worth reading because, unfortunately (?), they make a good case.
Bitcoin might be classified as a commodity, but nearly every other crypto out there, especially anything with a premine or any sort of revenue sharing, is pretty clear cut a security.
I disagree that the line between 'premine' and what happened with Bitcoin is actually all that clear.
Sure, genesis block yada yada but Satoshi (if he were alive/inclined) is still a multi-billionaire from behaviors that are pretty similar to what we call premining.
Are there any crypto tokens not backed by a state that the SEC has officially and clearly declared a currency and not a commodity?
I'm starting to feel, as a practical matter, they will never consider non-government backed crypto a currency regardless of what the rules on paper are. But maybe this has already happened and I'm ignorant, I don't follow this space closely.
There was no ICO, it has an immutable fixed supply, it's not in perpetual startup mode, and not centrally controlled operationally and can't be bought back.
Crypto is more a commodity than currencies, because unlike currency, crypto is subject to the same speculative supply and demand forces as conventional commodities.
Examples of non-physical commodities: music and apps.
Example of something that doesn’t exist at all: Carbon Offsets which are credits for negative production of GHG. Credits can be purchased on the market by companies to offset their own emissions for regulatory or other reasons.
So many of these HN conversations devolve into shit bonanzas because so many people approach this topic as if it is a "Regulation vs No Regulation" topic, instead of the more appropriate "Bad Regulation vs Good Regulation" topic, or even more appropriately the "Which agency should have jurisdiction" topic. And it is a shame, because cryptocurrency has largely outgrown the anarchocapitalist utopian's mindshare, and the people involved that actually want no regulation are an extreme minority now.
You're spot on here. The vast majority of cryptocurrencies (modulo a bunch of shittokens) are better described as foreign currencies or commodities, and they should be regulated as such. Unfortunately for the SEC, that implies that they don't have jurisdiction, and that regulatory burden lies with the CFTC. And from my handful of years as a commodities trader, I would much rather have the CFTC involved than the SEC. The SEC is too inconsistent...institutionally they act like a primadonna that is interested in making headlines more than creating effective policy. The CFTC is all business. They're not perfect, but they are damn good at their job, and they are transparent about what they do and how they work, and they don't see enforcement action as a PR move, but rather as a way to ensure functioning markets and common public interest.
The Supreme Court seems to agree. The SEC has lost 4 out of their last 5 SC cases on cryptocurrency. All indicators from those decisions are pointing in the direction of cryptocurrency being regulated as a commodity, which is pointing towards the CFTC being the ones in charge.
This case makes the news because that is how the SEC works. They won't win this case, and they will cover up that fact by doing what they always do...create more news.
Crypto companies think they don't trade securities which is clearly wrong and contradicted by their own advertising. People buy crypto without a real use for crypto because they think they can sell it for more later. Everyone under the sun knows this. It's obviously a security and failing to register should be met by SEC cases like this one.
> Crypto companies think they don't trade securities
To quote the Binance Chief "Compliance" Officer: "we are operating as a fking unlicensed securities exchange in the USA bro"
Source: Quoted in the filing yesterday where SEC sued Binance
> 111. As Binance’s CCO bluntly admitted to another Binance compliance officer in December 2018, “we are operating as a fking unlicensed securities exchange in the USA bro.”
A bunch of people have speculated that this was a CYA move. I mean, if you get hired as the Compliance Officer for a company which clearly has no interest in compliance and only hired you to give a facade of respectability, you probably want to have a paper trail indicating "I clearly communicated that this was against the law, and they ignored me" for when the cops inevitably come.
There are two modalities to crypto and the law needs to treat them differently. Running a node on a crypto currency network does not generate securities. It generates commodities. We don't tax people on the FMV of gold when they dig it out of the ground. But, speculating on the price of gold by creating a virtual token/contract/etc. and selling that, well that’s obviously a security. Just because people buy gold speculatively does make it a security. So buying bitcoin or chia (no longer eth) is still buying a commodity. Anything else, yeah, seems like it passes the sniff test for a security.
The sale is taxable obviously and of course. The same is true for gold and crypto.
But your relatives didn't get a tax bill for 25% of the value of the oil the moment it was prospected, did they? Their land value went up but they weren’t taxed on the value increase either (that happens when the land is sold).
Maybe I'm mistaken, but my property taxes increase as the value of the property increases. The sales tax is a tax on the sale itself when sold at price $X.
Sorry I meant you're not taxed on the value of the oil at the moment it increases the property value. You are correct that eventually the property value might increase in the eyes of the county assessor or via sale of the property and there would be a measurable effect in that regard.
Generally though, you also don't pay property taxes on securities (property tax is a pretty specific tax and a unit of crypto currency doesn't directly translate). I don't have any apropos objection to a property tax on crypto at the moment mostly because that's not the point being discussed. We just don't do it currently. The more appropriate analogy would be like you have barrels out and oil rained from the sky. Now you have some barrels of oil. Your land value doesn't increase, but also you don't get taxed because you collected oil from the sky. You get taxed when you sell the oil. Maybe we do need a tax on the latent potential of your property to generate crypto, or that information should be factored into property value, but again that's not quite what we're discussing.
"An excise, or excise tax, is any duty on manufactured goods that is normally levied at the moment of manufacture for internal consumption rather than at sale."
I'm very familiar with how the excise tax on alcohol works, it's definitely a tax on creation not consumption.
Article discusses Coinbase Earn, which was a staking service providing APY yields.
Is that not an unregistered financial product? That's also the kind of financial product directly behind FTX, Voyager, Gemini, and Lunacoin / Celsius collapses.
So we have direct evidence of a particular produce (staking) that is both unregistered and dangerous. That many Americans lost money over.
Minor clarification. Coinbase Earn is a lending product, you lend to Coinbase and you receive interest. The same applies to Celsius, it provided interest on money they borrowed. Coinbase also offers staking as a service, the SEC is also going after this.
But both of the above are different from actual Proof of Stake, as conceived by Ethereum. The SEC has made no mention of this in neither of the 2 current lawsuits. Unfortunately many of these products misused the term to whitewash or as a marketing gimmick.
Gemini didn't collapse, and an evidence takes a bit more clarity to be treated as such. Luna is.. a coin
Can't you get APY returns as a retail customer with pretty much any high street banks? In what ways is that less dangerous than going through a crypto exchange: by the fact the SEC is actively criminalising the activity rather than issuing licenses so that some customer protection via the justice system remains out there for this sort of market.
You mentioned FTX, that's a good example, an exchange run by a con goofy looking artist, that achieved such massive penetration even on the US market was made possible exactly because it is so cumbersome or impossible for a legit business to get a license, the crypto affiliated threats making it also difficult for normal banks to do any sort of business with crypto entities.
All that being said, sure, if they don't have a license they can be sued for their earn products.
The only clear distinctions, the one thing the name mentioned and many others still running
Ehhh, I got confused over the myriad of collapsed companies. Perhaps I shouldn't try to get better memory, but instead cryptocoin companies need to stop collapsing. Its getting difficult to remember each company's situation on an individual basis.
Gemini was sued by SEC for running unregulated securities and was forced to shut down Gemini Earn months ago. Whatever, but its just another example of the kind of products the SEC is clearly looking at.
> Luna is.. a coin
Lunacoin supported Terra, and Celsius was backing its staking product with Terra coins. Are... you unaware of the connection between Luna and Celsius?
I wrote "Lunacoin / Celsius" for a reason. This didn't even happen that long ago, so I guess I assumed people would know where I was going.
I'm trying to describe the scope of unregistered, unregulated, super-dangerous "staking" schemes that collapsed over the last year. The names I discussed are all related to staking.
I'm aware, I'm just pointing out luna is a coin. It's a bit hard to assimilate it to business entities running unregistered financial products on the US soil.
My understanding is that Celsius or any lender that gets exposed to a token value collapsing can quickly get itself in serious muds since loans have a collateral, and in crypto those are often crypto tokens. Anyhow that's my recollection of what happened to Celsius, i could be wrong.
I don't think the problem the SEC is invoking is "dangerous" investments. I'm not sure who would be entitled to make the difference.
You could stake eth and that would be one of the safest positions to take in the crypto space. Actually anybody can, whether the SEC sees it as OK, via centralised exchanges for those who can access them or decentralized exchanges for those who can't. But then of course eth could drop 95% in value by next year and the yield would mean nothing to compensate. It could go the other way and go the other way.
Does it make it a dangerous product? A security illegal to trade without a license which the SEC wouldn't grant a license to offer as a product to anyone? Because it's dangerous or because it's a security having drastic volatility? More volatile than Gamespot shares not so long ago? Does it make gamespot so dangerous it should be banned from trading as a security? And one last one, what is more dangerous, owning eth tokens staked for long term returns, or some treasury bonds issued by a country that is systematically on the verge of defaulting on its unbearable debt?
And who's to say? I don't think the SEC has any legitimacy left to be taken seriously, it let SBF runs business inside and outside the US soil for years, embezzling well over 10B dollars, whether he is innocent or an idiot crook the ridicule crown goes to the SEC for not having seen anything suspect until after the empire entirely collapsed.
About having flimsy memories, it's OK but it discounts serious weight throwing incorrect facts when attacking a type of trading activity as a whole. Your argument did read like because so many collapsed, the whole thing must be flagged as a failure. Anyhow, coinbase, kraken, binance, gemini, kucoin and many others have been operating for years just fine, and are successful, profitable businesses to this day despite all the obstacles regulators and the press threw at them.
Anyhow back to the main point, I'm with you earn products if unregistered are non compliant with regulations, so the SEC can have its case and continue to pretend it's doing its job.
>Can't you get APY returns as a retail customer with pretty much any high street banks? In what ways is that less dangerous than going through a crypto exchange:
Well, given that there are clear ways of issuing securities that have worked for hundreds of years that aren't being followed and that people generally don't get the rug pulled in normal securities, I'd say that it's less dangerous in many obvious ways.
Yes? Do you think underground activities would care about what the law says about them being illegal?
Coinbase at least is a registred corporate playing by the rules, aside the SEC viewing their yield based or futures product non compliant, but the SEC also makes it impossible to achieve compliance, so we may might left off with no code base and totally underground offerings, instead of "some" businesses in the clear that operates within the confined of a justice system. If you feign to see the point that's fine, i just hope you are not so blinded by anti crypto arguments that you can't SEC actions using force and paid by millions of tax payers counter productive for both consumers and the opportunity for the US to remain relevant in the growing crypto economy.
This requires a citation with data points, eg how many Americans lost money, how much money did they lose, etc. Because, what if there are more Americans who've made money than those who have lost?
> SEC said Coinbase has since at least 2019 made billions of dollars by handling cryptocurrency transactions, while evading the disclosure requirements meant to protect investors
This is a pure framing - it doesn't matter how much money Coinbase made. Otherwise, it means that if you don't make _billions_, you can conveniently avoid the disclosure requirements intended to protect investors. So really, they should've written something like: "Coinbase has been facilitating cryptocurrency transactions since at least 2019, while evading the disclosure requirements intended to protect investors".
While I do understand that these are the legal requirements, the protect investors "narrative" (khm-khm, requirement) is a joke. People lose money trading stocks / options / etc every day. To me, as a consumer, there is zero difference between trading AAPL on TD Ameritrade App vs trading crypto through Coinbase App. How's TD Ameritrade protecting me from losing money?
> Because, what if there are more Americans who've made money than those who have lost?
Why does this matter? Even if Americans are scamming foreigners (0 Americans losing money), that doesn’t make this legal.
The difference between aapl and coinbase is there is regulatory audits of the books and required publications about the health of the security. There are rules about insider trading and insurance protections if a brokerage mishandles your money (see Blockfi).
Because the parent said "that many Americans lost money over". Plus the SEC is "protecting investors". So I'm asking, what if there are more people who've made money over those who lost? Does that mean life's good? Coinbase has been pretty transparent about their operations. Not only transparent, they've publicly mentioned several times how frustrated they are dealing with SEC, the organization that is slow to come up with various legal requirements for the cryptocurrency industry. In a way, Coinbase helps the SEC to raise their own bar.
Would the SEC be protecting investors if they allow 1 investor to get scammed to the benefit of 2+ investors?
We need systems in place where everyone can make trustworthy investments. If people can't feel safe (even if it's one person or many people), then our economy will slow down (see current crypto prices post-terra, ftx, and more).
> This requires a citation with data points, eg how many Americans lost money, how much money did they lose, etc.
My coworker lost $X0,000 over Celsius.
So yes, maybe this is a personal bias. But its based in reality. His entire account at Celsius is written off. He managed to save his money from Voyager. I got cousins who lost money in FTX. Different people, but same overall problem.
If my personal social circle is showing huge losses in these companies, I have to imagine that other people out there have similar experiences. I don't need a study to prove the facts, I just talk to my cousins / coworkers / other people who are directly affected.
There, that's Celsius alone. Is that enough proof for ya?
> Because, what if there are more Americans who've made money than those who have lost?
Its not about making or losing money. Its about accounts disappearing because they've been lied to.
We're all adults here. We know that investments can lose money. But lying about those investments is where the law needs to step in. Liars need to be punished. And I get that people have been skirting the truth recently. But when we get to Celsius, Voyager, and FTX, the money was just straight up being stolen. Its the worst case offenders.
So now we need to think about what kind of culture caused these crimes. And its increasingly looking like "staking", and the culture surrounding it, is to blame.
> If my personal social circle is showing huge losses in these companies, I have to imagine that other people out there have similar experiences.
This is a personal bias. I've made $86,000 trading Ethereum. My brother-in-law made $24,000 trading Bitcoin. My reality is different from your reality ¯\_(ツ)_/¯
I can't speak for Celsius, Voyager, and FTX. If there was a scam, it has to be punished. No questions asked. But Coinbase has been closely working with SEC for years.
The problem is that companies like Celsius, FTX, and Voyager are disappearing and collapsing.
Binance and Coinbase are two other companies that could just randomly disappear because of how incredibly sketchy their products are (especially "Earn" or "Staking" products).
I'm pointing out companies that collapse (taking literally Billions of American money away). And you're just coming in here saying "But I made money on something totally unrelated", as if its a good argument?
> This is a personal bias.
I'll proudly be biased in favor of reality. There's nothing wrong with taking a stance when my real world friends get affected.
> I can't speak for Celsius, Voyager, and FTX. If there was a scam, it has to be punished. No questions asked. But Coinbase has been closely working with SEC for years.
Coinbase is doing the same thing as Celsius, Voyager, and FTX with their Earn / Staking products. And now the SEC is suing them over it.
There's a pattern here. And I for one, am glad that the SEC is no longer fickle and is trying to be proactive about it. Trying to get American money out of these dangerous instruments before they collapse, rather than after (when its too late).
Dude, I made that comment in response to your "My coworker lost $X0,000 over Celsius" to highlight the fact that not everyone's circle is losing money.
> Coinbase is doing the same thing as Celsius, Voyager, and FTX with their Earn / Staking products. And now the SEC is suing them over it.
Why can't SEC work with Coinbase before suing them? Again, Coinbase has been seeking help from SEC for years. Brian Armstrong, the CEO of Coinbase, talked about this so many times. They are trying to work with the regulators, but the problem is that the regulators lack expertise dealing with these new asset types.
> Why can't SEC work with Coinbase before suing them? Again, Coinbase has been seeking help from SEC for years.
How has Coinbase been "seeking help"? They are a company, they should be going to the SEC with all of the particulars of each of their investment items and saying to the SEC "We believe we have met your standards of fiduciary duty on these items that appear to be securities, have we?" They shouldn't be saying, "Hey, SEC, are these things we're selling securities, and thus need a higher standard of duty of care? Tee hee, we can't figure it out on our own, as we're just a little company with thousands of employees trading billions of dollars a year. Until you get back to us we'll just assume that they aren't securities and won't bother meeting the higher standard of care."
They filed a petition which SEC failed to address. The result is Coinbase suing SEC. Now, SEC sues Coinbase back. Seriously, wtf? SEC needs a massive slap on their hands. If they lack expertise and don't have enough knowledge (literally), then whoever works there should go "back to school" (figuratively speaking), learn all the ins and outs of crypto, and only after consider joining the SEC as an employee.
Coinbase brings this mandamus action to seek modest, but meaningful and time-sensitive, relief: a writ requiring the Securities and Exchange Commission (SEC or Commission) to act on Coinbase’s pending rulemaking petition to provide clarity for the crypto industry. Coinbase does not ask the Court to instruct the agency how to respond. It simply requests that the Court order the SEC to respond at all. The Commission has repeatedly demonstrated that its mind is made up to deny the petition. But the Commission’s delay in formally announcing that decision has enabled it to improperly delay judicial review at a critical moment for the industry.
> “We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler. “In other parts of our securities markets, these functions are separate. Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC. Further, as we allege, Coinbase never registered its staking-as-a-service program as required by the securities laws, again depriving investors of critical disclosure and other protections.”
Seems rather straightforward to me given this press release.
Quit comingling functions. Bring your exchange to proper legal structure in the USA. Split the broker-dealer and clearinghouse functions off.
And quit operating Coinbase Earn, which is an obvious security by any other name. Either that, or properly register Coinbase Earn as a security before offering it as a product to the public. If you are to keep operating Coinbase Earn, then bring it under security regulations, which means reporting upon your assets and such under whatever filing system you want (probably bonds?)
Its... not even that hard to read the SEC complaint. Just read it, the complaint is right there for all of us to see.
This is indeed straightforward, but I'm not complaining about it. If all of these requirements had been outlined by the SEC prior to the release of the products, Coinbase would've followed the rules. Now when all of these products are in production, the SEC woke up and like: "heeey, this is a security, you must follow the rules". But there were no rules before. So, shall Coinbase just sit there and wait while the SEC learns more about blockchains? I don't know if there was any "warning" from the SEC, but if not, they should've published a public one first: "Due to X, Y and Z, the SEC gives Coinbase 6 months to split the broker-dealer and clearinghouse functions off".
The rules always were there. Just that the SEC was willing to turn a blind eye for years on this issue.
The reason why SEC couldn't ignore this anymore is FTX and SBF. It became clear that cryptocoins are full of fraudsters, and the cryptocoin community has absolutely no way to differentiate from the fraudsters and the legitimate groups.
SEC is simply not in a position to keep turning a blind eye to the cryptocoin world after $10,000,000,000+ was stolen by FTX and SBF.
> Dude, I made that comment in response to your "My coworker lost $X0,000 over Celsius" to highlight the fact that not everyone's circle is losing money.
But you making money doesn't allow my friend, or anyone from FTX, or Voyager to get their money back.
And you fail to see that it is HOW he lost money that I take issue with. Celsius lied about unregulated staking/interest yielding instruments to him and the natur of how it worked.
And Coinbase is making the same lie right now with Coinbase Earn. And you are sitting here defending it, and ignoring three major collapses last year while doing so.
By definition, Ponzi schemes involve some investors making a lot of money and others losing. That doesn't make them any less illegal.
If some people are harmed by unlawful behavior, that is a reason to prosecute, just the same as if you mugged Alice and bought Bob an icecream with the proceeds.
If you opened an exchange and did nothing but trade bitcoin, and only bitcoin, you would be free and clear, but there is no real money in that. Coinbase argued a few years ago they were losing to competition because their competitors could do a lot of gray area stuff they couldn't to do being a US-based traded company. Getting listed on Coinbase used to be the gold standard of a trusted, respectable crypto, but they at some point decided screw it and just embraced the coming legal challenges.
Bitcoin itself might not be. Even many other currencies might not. But what other "products" they are running? Those could and probably would fall under various classifications.
Honestly bitcoin not being a security has been one of the biggest mistakes the SEC has made over the past decade. They gave that guidance and are stuck with it now. But the argument for it being a commodity is pretty weak and being a security would be useful from a regulatory framework. I think it's pretty clear bitcoin needs as much or more regulation than a typical stock or bond and is a more likely source of fraud or problems than typical stocks or bonds are.
If that's true, then why did the SEC approve Coinbase's IPO and not doing anything about it until years later? Even in spite of Coinbase meeting with the SEC hundreds of times and testifying before congress. This is a complete change in their stance by the SEC.
You're saying that the SEC knowingly allowed Coinbase to become a public company, have insiders dump billions in stock on the public, and then continue to operate a completely illegal business for another 2 years without taking any action at all? Not even issuing any guidance which Coinbase requested from them dozens of times?
If so, that would be a huge scandal and the SEC should be investigated immediately.
A much simpler explanation is that crypto was largely ignored by regulators, including the very shady parts like FTX, for most of Coinbase's life. When FTX imploded, lawmakers turned on crypto and put pressure on the SEC to attack the industry. This is why there's been a whole series of actions by them in the last 6 months.
It's absolutely unclear what the SEC is doing here at all. Why is ALGO a security and ETH is not? They do the same thing. What are the implications of this lawsuit? Completely unclear. This is vague and unhelpful.
edit: Keep downvoting - the fact, with a clear example, remains.
The fact that they have been asked, point blank, by congress, "is ETH a security?" and the SEC wouldn't answer is pretty fair for claiming "not perfectly clear."
Even here, it wasn't all of ETH that is under question. So, if you have bought some ETH from coinbase, it isn't under fire here. If you paid them to stake your ETH, it is. It is unclear, to me, what it would mean for any ETH you staked personally.
That's the root of the problem - it's absolutely unclear what the global implications are and if this will be used to go after individuals staking on their own, etc.
I've watched that interview, congress would ask a loaded question, framed in a fallacy[1], the chair would start answering it, and the congresscritter would interrupt him and throw a tantrum. Repeat 5x.
It wasn't a good look. For the congresscritter.
(I wonder how much money he's gotten from Sam, CZ, and Coinbase...)
[1] The fallacy in question is the congresscritter's claim[2] that a security can't also be a commodity. This is trivially disprovable by a simple example - an isolated company town using scrip, where the scrip also happens to be company stock.
[2] Whenever the chair would start responding to the fallacy, the congresscritter shouts over him, because if he doesn't, his argument-in-the-form-of-a-question falls to pieces.
A question where answering easily implies past behavior is very different from one that does not. "Do you think it is ok to beat your spouse?" better not get any slow rolled answer, and is more comparable here.
Hell, I'd be fine with a hedged answer of "it can be." That would make a ton of sense and would make sense. Akin to asking "is it speeding to drive your car at 40?" The answer would be "in certain situations, certainly. Can be too fast and it can be too slow." So an answer of "I can't answer without more context" would be fine.
Past behaviour isn't the issue. An incorrect assertion is the issue.
Let me give you another chance to answer a simple yes or no question.
----
Since it's obvious that democrats are all criminals and baby-eaters, is Elizabeth Warren a democrat?
Yes or no. No hemming or hawing. I'll interrupt you as soon as I hear any words besides those two. Your answer or failure to answer will appear as a headline in the New York Times.
----
The chair was responding to the statement made in the question, the congressman just didn't like what that response was, which is why he kept interrupting.
The question was literally "is ETH a security?" To compare that to the questions you are stating is laughably bad faith argument.
Though, I'll bite. What statement is made by the question "Is ETH a security?" Why is that a question that can't be answered with "Yes", "No", or "it depends how it is packaged"?
The question was literally "Because something cannot be both a security and a commodity, is Eth a security?"
The chair's answer was, as we can glean from the interruptions (but who the hell really knows, the man's not allowed to finish a sentence) 'It depends'.
If he was saying "it depends" he had a lot of words to say that. His sentences were like my talking to the kids when I ask "did you do your homework?" It was painful.
And note that some things can be both a security while wrapped around a commodity. Just look at brokered CDs. Such that, even if you agreed that ETH is a commodity, you can still have financial instruments on ETH that are securities.
For any who might be interested, a link to the exchange that this user is comparing to asking if "democrats are all criminals and baby-eaters" [0]. Remember, the law is "extremely clear" on whether these tokens are securities or commodities, according to the GGP commentator.
> People keep saying that regulation is unclear, when let's be honest, it's perfectly clear. Just not what a lot of people wanted to hear.
I honestly don't know how you can say that with a straight face if you have ever looked into this for more than 5 minutes.
The regulation is not clear and they refuse to clarify when asked on many important topics. Compare that to other security related issues, where regulators are very proactive about clearly defining what is what, publishing explainers, etc. etc.
The primary use cases of ETH are changing state of the network and collateral for state change validation. Requester pays to effect change and some ETH is burnt and some goes to validators to incentivize operation. What other security does that? I don’t expect profit when using it to change state of the network.
SEC is supposed to tell them what is a security and what isn’t so they can refrain from selling them. Exchanges have been asking for clarification over and over. So far the only thing the SEC said on the subject is that BTC in not a security but nothing about the other cryptos.
In the absence of regulatory clarity Coinbase have devised their own framework to classify what tokens aren’t securities and proceeded to list them. I don’t know how you can blame them. It’s the SEC’s job to tell them what they can trade and what they can’t but they refuse to do it.
When tokenbro industry invented a very convoluted asset class they expected government to say "Oh, it's really hard to understand and classify it, that's why we won't do it at all. You guys can do whatever you want now.". But actually they said "Oh, it's really hard to understand and classify it, that's why we will have to do it the long and painful way, and you guys can wait for us or not. But if you want to operate before the decision is reached - it's on you if you break the law.".
Apparently a really convoluted business plan is not an inherent human right, if it is masking law infringement in he mean time. Who knew, right?:)
That's not how it works. They say what a security is. It's not their job to be babysit. Corps wishing to play in this field are expected to understand the basic foundations.
What about tokens that are used to pay the network, like Ethereum? If you want to use any chain that uses Ethereum, either as a L1 or L2, you need ETH.
It's almost as if people don't actually want a multiple dollar transaction fee that can take an hour (or more) to process.
That may be acceptable when you use bitcoin (or more likely Monero) to buy whatever your heart desires, but is absolutely not usable for regular purchases.
I could ask the same for a lot of things, though? Time shares, collectible card games, collectibles at large, fashion at large, etc.
Not that I can or will wholly defend crypto. That just doesn't seem like a relevant complaint.
I do question the desire for everlasting permanence of the blockchain. I know we like to keep real estate deed records and such going back as far as we can, but even there we have limited utility of that. Encasing it in a technical solution that expands to cover more transactions does feel limited in usefulness. Largely ironic/funny that it makes it incredibly unsuited to criminal use.
They bring the probability that you will be harassed by police/landowners/elements/civilians when residing in an area way down. Personally, I take the harassment and sleep on the street. But it's not easy and many would pay not to.
> collectible card games
You have fun when you play them. People pay to have fun.
> collectibles at large
Idk some people just get weird addictions. I put collectables at large in the same bucket as crypto, no defense there.
> fashion at large
Looking good is more likely to get you laid. People like getting laid, and will pay for it.
Do note that the SEC's argument is usually along the lines of "if anybody is buying this to make money, then it is potentially a security." The "common enterprise" part makes it a bit different, but only a bit.
Also note that time shares typically are securities, in my understanding. In contrast to a house, which is not. My argument there wasn't to identify some other things that are or are not securities, but "things that are kinda useless." In the case of timeshares, I'd say they are actively more harm than good.
Umm, OK. Funny that's not how it's been marketed. But I'm baffled as to how cryptocurrency is better for doing that than all of the other ways of doing that.
The drugs I've bought with cryptocurrency have been cheaper and of better quality than the drugs I've bought with dollars, by a wide margin. So there's that.
The marketing you're talking about is for the investors. By the nature of the product, the users have powerful adversaries and are probably operating in secret. You can't expect their use cases to show up in the marketing, that would defeat the purpose.
Sure, you get the bad with the good. There are definitely unsavory things going on under the covers. But you have to weigh that against the misbehavior of the powerful in a world where they're more difficult to coordinate against due to a underdeveloped crypto.
It's a trade off, but I think it's a worthwhile one.
> in a world where they're more difficult to coordinate against due to a underdeveloped crypto.
This is the part I don't understand. How does cryptocurrency make it easier to coordinate people than all the other tools we have to coordinate people?
If you rely on systems that involve implicit custodial trust (i.e. not crypto) to coordinate with your homies, and you have powerful adversaries, your adversaries will compel those custodians to prevent you from communicating with your homies. They also might find you and hurt you.
This happened with thepiratebay and DNS. It happened with wikileaks and paypal. It happened at the ISP level with Signal during recent unrest in Iran. It happens with the US banking system anytime somebody manages to get somebody else on one of the OFAC lists. It happens to would-be radicals on twitter all the time.
On the other hand, systems that don't involve implicit custodial trust don't have these problems, which is why journalists in China occasionally publish on Ethereum, because the Chinese censors don't have a single-point-of-failure to attack.
I don't think that currencies are an especially interesting application (although the wikileaks case is an example where they are relevant to group coordination). It's just that the currencies are what gets hyped because they're relevant to the investment side--without them, there's less money to build the other stuff.
Another example which I expect to emerge, but which I don't think has been developed yet, would be the use of NFT's in a successor system. If the leader of a movement gets apprehended or incapacitated and they don't check in after a certain number of blocks, then a contract moves the leadership token to their successor. This denotes the successor's signing keys as authoritative, and the leader's (presumably compromised) keys as deprecated. If you keep signatures on-chain you can also tell which ones were registered at a time when they were valid.
You couldn't do this on AWS, somebody would just compel AWS to remove the data they don't like, you need something like a blockchain. But it only works if enough people are running nodes to make attacking all of the node operators infeasible. For that you need to provide incentives, and now we're back to cryptocurrency.
For me it comes down to whether you think dissent is more important than preventing all of the shady business that goes on in secret online. I do, so I'm pro-crypto. The currency bit is an ugly necessity which I hope we can find a way to get rid of.
> If you rely on systems that involve implicit custodial trust (i.e. not crypto) to coordinate with your homies
But there are myriad ways of coordinating without relying on a systems that involve implicit custodial trust. More so now than ever.
But I get the sense we're talking about different things here. I was talking about coordinating activities with groups of people. You seems to be talking about payment systems.
> If the leader of a movement gets apprehended or incapacitated and they don't check in after a certain number of blocks, then a contract moves the leadership token to their successor.
You could use blockchain for this, but equally you can use any of several other methods to achieve the same effect.
> For me it comes down to whether you think dissent is more important than preventing all of the shady business that goes on in secret online.
For me, this doesn't enter into is. I do think dissent is critically important. I don't see how blockchain is essential to doing that. Why bring in something as tainted as cryptocurrency when there are other options?
You keep saying that there are many alternatives, but I don't know what you mean. I'd like to outline a scenario and you can tell me which technology you think would scratch the itch:
Suppose you're a journalist in a place with an oppressive government. You have information about government behavior that you expect will cause protests. You're not an activist though, so you don't want to actually plan those protests.
Suppose I'm an activist in the same country--I'll plan the protest--but we don't know each other. We've got a friend-of-a-friend-of-a-friend... kind of relationship.
Ideally you could post the information somewhere, and then our mutual friends could post annotations which validate it. They'd be attaching "I was there and I saw this happen" kind of information. I would then see this information because I explicitly/transitively trust people who have validated it. The government can inject disinformation about it, but it just gets ignored unless they manage to get us to explicitly trust their agents about this kind of thing (presumably this will be prohibitively expensive).
The government will find us and hurt us if they catch three or four of us coordinating in this way. But if there are thousands of us, it will be a different story. So we need to collect a critical mass of validations, and we need to plan the protest, and we need to do it in a way that the government can't prevent and which doesn't betray our actual identities to the government--at least not until we all show up at the protest site.
I'm working on this app, by the way. I intend to have pluggable backends so it won't be coupled to a specific blockchain--you could use it over ssh for instance, or a thumb drive, or via a shared S3 bucket--but it's the blockchain backends that I expect to be most useful in situations with many stakeholders and truly aggresive adversaries because it's not realistic to expect users to maintain the system of file transfers necessary to ensure that the annotations dataset converges in a way that gets the message and its validations from journalist to activist, or from activist to other activist.
Sneakernet / file transfer will be the first backend that I support. What should I support second?
What is tamper-resistant enough that the government can't remove the data, lacks dependency on a naming system which can be tampered with to hide the data, and is also public enough that all parties can access the data and know that the version they're accessing is the real one, if not a public blockchain?
Granted, there may be solutions that are not technically a blockchain. I'm curious about Kademlia DHT's, for instance. I wonder if SSB can be used here. But so far as I can tell, all serious contenders are, if not blockchains, blockchain-like.
Simple example is that if governments control finance you can't coordinate if the government is your opposition. If you start sharing resources as a means of coordinating, governments can always just compel the banks to shut down your account.
Governments can't shut down crypto nearly as easily due to its decentralized nature.
I don't find this argument compelling at all, because I can't think of a historical example where fiat currency prevented coordination of antigovernment people.
I also find it interesting that the pro-cryptocurrency argument centers around being antigovernment. So it's a political thing, not a practical thing. That automatically means cryptocurrency has no chance of mainstream adoption. People who don't agree with the politics of it will avoid it because they don't want to be associated with those politics.
Many clear examples of it being used to coordinate in opposition to fiat because the governments can't be trusted. And it's working far as I can tell. We just don't hear about it in the first world because our culture is so apathetic about anything happening in poverty oppressed nations.
Worth adding I'm not pro-crypto or anti-government. For transparency I have less than $10 grand in crypto which is no big deal for me to lose overnight. I think there is a good enough case to invest but not enough to make it large part of my portfolio. I don't believe the hype but also think throwing it out with the bathwater is likewise unnecessarily absolutist.
"People who don't agree with the politics of it will avoid it because they don't want to be associated with those politics"
Tell that from the majority of crypto users who reside in the third world and derive actual value from it. They are not politically homogenous (leftists and rightists use crypto on the third world) and most probably don't care much for decentralization as a means of political action. They just want something that works and is less corrupt than the incumbent system.
This might be a political stance, but it's not exactly a radical one:
> Tech that mediates a relationship between two users should not give special powers to a third party.
It's not anti-government, it's anti-tampering. I'm most concerned with government tampering, but that's just me. I can exchange tokens with somebody who is concerned with alien tampering (something I don't worry about in the slightest) and we can all disagree about the "why" while still agreeing on the "what".
Maybe there's a subset of users that would prefer to have some authority they can appeal to when something goes wrong. That's fine, crypto isn't for them right now. But I suspect that those authorities will eventually abuse their position of trust. When it happens, I hope crypto is a nice enough place for them to turn to. As it stands there's a lot of work to do for that to be the case.
imagine when the bank was invented and somebody said, "imagine if somebody's bank account is frozen for political reasons." and somebody said, "this hasn't happened to banks yet, but somebody's satchel got robbed for political reasons"
Mastercard and paypal have both shut down legal activity in the last 4 years on the backs of government decisions or targeting legal, but politically inconvenient activity and there seems to be no slowing down on that avenue. Pornhub is one recent major example of that.
The idea that it's just criminal enterprises that benefit from being able to participate in markets without interference is laughable at best given the increased interconnectedness between banks and the regulators themselves, especially not even 6 months after a rash of major banking failures within the traditional financial markets.
There is very little reason to have a favorable opinion of the SEC following the 08 collapse given their own hand in it or the banking failures existing now, especially when they refuse to clarify their position on what is or is not a security so people CAN legally operate in the space. It appears to many both inside and outside of the space that the SEC is wielding its regulatory arm to create winners and losers, and with their own track record it's a failing proposition.
It may be hyperbolic, but the holocaust was a legal activity in Nazi occupied territory.
The specific crypto tokens they are classifying as securities are: SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH,
and NEXO.
Of course they say "not limited to" to hedge their bets, but those are the ones they specifically mention. This is the exact "regulatory clarity" Coinbase has been asking for, but the SEC prefers to sit on their hands for years (while investors are "harmed") and then sue, rather than actually tell Coinbase what they think up front. Sure seems self-serving to me, rather than anything like a genuine interest in protecting investors.
Nononononononononononono we don't get to play that game. The SEC has perfectly clearly communicated for years its regulatory clarity: most crypto-currencies are obviously securities.
When Coinbase and others say "regulatory clarity", they want the answer to be some framework for how they can continue to sell crypto to everyone/anyone. But that's not the policy!
Most of these coins are some combination of ponzi schemes, vaporware, pump-and-dumps, fraud, money laundering, rug pulls, etc. The SEC's position absolutely protects investors from getting involved with that crap.
That is the policy. The SEC has said that some cryptocurrencies are OK, like Bitcoin and Ethereum. And though today they gave a list of some they don't like, there are plenty of others that they still refuse to talk about despite explicit requests. What is the point of being opaque about it? It's not protecting investors, that's for sure. Seems more like they just want to be punitive.
Let's say a new government organization makes a rule "You'll get fined if you make a red ball for playing catch"
You think about it for a while, and decide to make a red Hecatohedron for playing catch. You start playing catch with it and if it's ok. The new government org doesn't reply and eventually fines you.
Hah. Protecting investors. What a bunch of croc. This was never about protecting investors. If it was they would have issues the guidance 5 years ago. This is about blowing up crypto in general by removing the on/off ramps (ie the exchanges).
Also: mandatory crypto is bad for the environment and it consumes more power than the whole country of Argentina! /s But nobody seems to care or talk about how much power crapGPT is consuming. The future they tell me
> Also: mandatory crypto is bad for the environment and it consumes more power than the whole country of Argentina! /s But nobody seems to care or talk about how much power crapGPT is consuming. The future they tell me
He's right you know: [0] [1]. Cryptocurrencies like Ethereum moved from proof-of-work to proof-of-stake, eliminating 99% of their CO2 emissions. [2] There are alternatives to PoW and they exist today.
AI (Deep Learning) on the other hand is going to continue to waste more energy, water, etc has no viable efficient alternatives in training their deep neural networks without building more data centers.
Deep learning actually provides something of value now, and the training is in service of seeing if maybe it could do better in the future. Crypto provides a way to part fools from their money, and a way to circumvent financial laws.
Yes, I get that there's "value" to circumventing sanctions and whatnot, but that's the same sort of value as making people phone you to cancel a subscription or optimizing CTR on an ad or whatever. It's not the kind of "value" that benefits society.
I've personally gotten a lot of value out of generative AI models and I run/train everything locally on 5 year old hardware. It's the literal opposite of the thing you said, we finally have AI that's incredibly accessible and open. Anyone with a half decent GPU can do interesting things with a 2gb blob of tensors.
The reason regulators have waited years, despite the facts of the matter being legally obvious, is not wanting to be blamed for blowing up the whole ponzi house-of-cards. They've waited until enough such houses blew up on their own, that they feel "the facts have been demonstrated".
If you want to know why they didnt "blow up crypto", "five years ago", its because of you -- and this attitude.
Without it, vast swathes of online grifts that have ruined peoeple's lives wouldve been blown out the water by now.
The SEC had a hand in the subprime mortgage crisis, quite literally there is no reason to believe they are regulating on the behalf of anyone except the large banks. They absolutely are not regulating to help "investors" they are regulating to protect big banks like JPMC, just like they did in 08.
This is genuinely ridiculous. The "big banks" can buy up and own as much of the crytpo ecosystem as they desire, and all the "whales" are "institutional billionaires".
Crypto has, for years, been held by "the elite" -- and Andreessen et al. are exactly using it as a system to commit securities fraud.
The direction of wealth flow in crypto is from late retail entrants to billionaire major holders who cash out using late entrants.
The idea that the SEC, post-collapse-after-collapse, is here to "protect JP Morgan"... i mean, this is a patent lie, misdirection, and act of desperation in trying to set up the SEC as the scapegaot for this exploitative system's failure.
I fail to see how that isn't the case when Gensler went to bat for FTX prior to their collapse in similar fashion to the way the SEC behaved in 08, refuses to clarify surrounding the second largest coin in the market, and then comes down on exchanges after years of refusing to clarify what is or is not illegal conduct.
They created a situation in which they can choose winners and losers and people are surprised that they're viewed as corrupt?
Gensler was taken in by the tech angle -- duped by the (false) claim that this was a world-changing technical innovation. He was, for years, convinced that "revolutionary" blockchain technology was a viable peer-to-peer accounting ledger for a wide variety of assets.
This is the problem with this area: lots of finance guys with no csci experience; lots of csci guys dumb on finance.
Anyone who has enough experience of both worlds runs a mile from all of this, and can see the toxic mixture of IT hype, finance "collectables mania", and grift.
The SEC is just catching up to how much the finance industry has been duped by bros-in-shorts talking about "algorithms"
The SEC isn't catching up to it when they've explicitly refused to clarify to both the people they are trying to regulate and the lawmakers themselves on what they determine to be a security.
The SEC created a situation by which any action could be deemed criminal and only decided to regulate when it was politically expedient to do so.
There is no reason to believe they are doing this on behalf of protecting investors, because investors have consistently asked for clarity and the SEC refused to do so, and are only now going after the large exchanges after a rash of traditional finance banking failures.
For all of the criticisms against crypto, there is zero reason to believe the SEC is operating in good faith because they have shown time and time again they are not.
Never have new "technologies" been regulated "on release" by any government agency, i believe credit cards took ~20 years.
The SEC here is acting perhaps the fastest ever to the development of a new financial instrument.
The howey test was always clear to everyone invovled. The whole "SEC hasnt said anything yet" is a line used by liars to cover-up and distract from their patent fraud -- which takes place, not coincidently, off-shore. Every investigation so far has yielded plenty of internal chats to the effect of 'lol this is illegal lol lol'. No one here was in the dark, that's why everyone has redflags out-the-wazoo.
The background historical context here is also that gov cannot been seen to stifle new tech, and has to "give it its fair shot" absent regulation. Or else be blamed for its failure.
I think it's frankly obscene after the fraud-after-fraud-after-fraud that is the entire crypto system, that any body would pin anything on the SEC.
This is yet another lie designed to distract form the last 13 years of failure -- all the crypto system has done is breed massive amounts of fraud, money laundering, ransomware and the most industrialised grift in human history.
The SEC has not failed here one iota in comparison to this industrialised con.
I know their are legalities I am not an expert in on finance, but my conspiracy theorist is bubbling up given the failed crypto bank, the SEC suing Binance and Coinbase, and the US and world government move for traceable, government managed and controlled digital currencies.
I was at the first HOPE in 1994[1] at the Penn Hotel in NYC when Eric Hughes (known for the Cypherpunk Manifesto) and others gave a talk on cryptography and how it would be part of a future of privacy and security for anonymous banking etc. I was so enthused about getting rid of the middle man (a minimum of 4 or 5 entities process your latte purchase at Starbucks and take a cut as well as track you and your data trail). Government doesn't like this. "What do you have to hide?" is a tired defense of prying eyes.
Yes, there were a lot of bad fish in the pool, but the goal was and is still good in my book.
It's gotten to the point where political candidates (and politicians) have to cover their tracks when paying for things, lest they be criticized for their choices. If you ever want to run for office you'd better never use a credit card at a porn shop, McDonald's (it's unhealthy), etc. This applies to data that insurance companies harvest from as well.
I used to be one of those people that said "I have nothing to hide and the conveniences outweigh the negatives", but I'm getting more and more cynical on data dragnets as I'm growing older.
Sometimes, but I have been avoiding Starbucks unless I am 'renting' office space there. For a quick coffee the bodega, deli, or Dunkin. Some retailers have made it hard to pay cash by installing card only systems. Others have long lines for cashiers and self-checkouts sometimes only take card. It's painful to see young kids struggle with making change, because they are so used to the phone/computer figuring it all out for them.
And there we go. The promise of a form of cash outside of USA government control is terrifying to the USA government. And well, most other governments too.
It is pretty obvious that when the USA government goes after crypto exchanges, what matters is to get the exchange shut down. The actual justification for doing so is an afterthought.
I'm torn on the issue of whether dematerialized privacy-preserving cash (and yeah, I know crypto exchanges had very little to do with that) is even a good thing to begin with. To me the strongest argument for it is that the crimes that would be facilitated by that are already trivial, as long as you're rich enough. You don't need Monero when you can "sell" a Monet in exchange for services instead. It is incredibly hypocritical of governments to complain that privacy-preserving currencies enable criminals when they have done literally nothing to stop the numerous convenient ways to launder money that are accessible only to rich and powerful people.
That is putting the cart before the horse. The USA is not a libertarian government. Why did anyone think that it was a good idea to invest in products that would only survive in a libertarian government?
I think investing in crypto is purely based on greater fool theory.
Doesn't mean there aren't any legitimate uses for cryptocurrency, let alone the blockchain technology.
In this sense, why should Coinbase and a currency exchange booth in some airport be considered any different? Of course, Coinbase doesn't quite operate statelessly like that, and to me that's the issue here.
I think part of it might be that the only use case for which crypto really works is for drug dealers to safely conduct transactions.
I believe in the right to privacy, but I believe in it as an extension of a personal right to self-expression. Freedom to practice your religion, to date whomever you want, etc (provided it doesn't hurt others), sure. Freedom to hold 10^9 USD secretly so that you don't have to pay tax on it and can peddle drugs, not really.
None of those posts except the last looks like taunting the SEC to me, but rather keeping the public and their customer base in particular up to date on a live regulatory issue that may present a risk to their business. That is the type of thing the SEC requires (at least of publicly traded companies) not discourages.
If criticizing a regulatory body causes them to go after you, then that regulatory body is corrupt and should be dismantled and replaced with something else.
And neither is justifiable cause for regulatory action.
I don't think this is the reason the SEC is going after Coinbase, but frankly I don't believe the SEC is doing any of this on the behalf of "protecting investors".
And given the number of cryptocurrency exchanges the SEC has been suing in the past several days, it is rather unlikely that the SEC is targeting Coinbase because of Coinbase's criticisms: had Coinbase said nothing, the SEC would still be suing Coinbase.
of course, how dare private citizens not kiss the feet of unelected government officials. I love when government institutions take retribution for being "taunted"
Curious how authoritarian hackernews is - is this just a knee jerk reaction to annoying cryptobros? Sounds like a board of police officers/retired army men right now commenting on how "that boy had it coming"
It's a long-simmering annoyance at the decline of the cryptocurrency ecosystem: from the really cool technology underlying Bitcoin, to exciting whitepapers with different solutions to hard problems on other coins, to intractable whitepapers designed to create hype for coins that do nothing, to the clear creation of exchanges as places to gamble, to the sidelining of anyone in the cryptocurrency world trying to solve any problem other than "get rich quick", to the collapse of FTX.
All through it the definition of a security has been clear, but Coinbase et al has pretended that the issue is "regulatory clarity" and not "we are operating as a fking unlicensed securities exchange in the USA bro".
Very rarely a cool use case for cryptocurrency will come up, but the marketing is now entirely "invest and make money!", which is some combination of tedious and scammy, depending on who it's coming from.
That checks out. I got out of crypto a long time ago, back around when people were creating doge based coins for a laugh, i can imagine it only got a lot worse.
He is apparently BAM CEO (B) of the SEC’s Binance lawsuit [0], and also worked at Coinbase (to setup compliance) [1]. I was reading up on his activities on his wiki page and rather impressed. Was a comptroller of the Currency for a while in 2020, too. He’s still sitting on the board of another company that’s in block chains (BitFury [2] does infrastructure) and apparently a lot of “vision” related stuff [3]
“”” After working at Fannie Mae, Brooks was Chief Legal Officer of Coinbase from 2018 to 2020. Coinbase is an $8 billion Silicon Valley startup that is one of the largest digital currency platforms in the world. At Coinbase, he was responsible for the company's legal, compliance, internal audit, government relations, and global intelligence groups. “””
I got a chuckle from the “democratizing edge AI” since they are selling surveillance AI for the edge. Reminded me of Washington Post’s masthead. Are they being ironic? /g
I doubt the USG is competent enough to have a masterplan like that. This just seems to me like the actions of a person (Gary Gensler) who personally dislikes cryptocurrencies and who is trying to establish himself as a political player through his "bold actions".
None of the time that libertarian beliefs could protect civil liberties is it ever taken seriously. It exists solely to launder corporate protections and deregulation.
Nothing significant happen to the NSA after the Snowden leaks, nothing significant happened to the FISA court.
Also I don’t get how something like CBDC ever exists because of how powerful Visa is.
1. Despite any theoretical applications, all applications of crypto thus far have been to bypass laws. Some of these might be moral (eg avoiding currency controls in some countries like Venezuela) but mostly it's just illegal stuff;
2. No one is really interested in applications. They're "hodling" [sic] because of Bitcoin FOMO. They want in on the next Bitcoin.
3. Scams and rug pulls are rife in crypto. Taken with (2), this implies that people who think they're getting rich in crypto are only going to do so by scamming or rug pulling other people who will be left holding the bag;
4. Despite all the claims about verifiability, somehow the crypto space still needs strong government intervention to deter and prosecute scammers, criminals and thieves. That's another big L for the libertarians and goldbugs-turned-crypto-bros out there;
5. NFTs are the next level scam about crypto and really only exist to sell more crypto;
6. A lot of otherwise smart people have fooled themselves into thinking that their knowledge, skills and experience with some other area somehow magically translates into finance;
7. A whole bunch more snake oil salesmen are happy to sell others this lie;
8. The desire and desperation to get rich by many "hodlers" causes them to fool themselves into thinking there's any value in crypto;
9. Reversability of transactions and the ability to change the money supply volume are features not bugs; and
10. What underpins the US dollar is, ultimately, the full might of the US government and military as well as trust. Crypto too is ultimately still built on trust but has nothing else behind it.
It actually seemed to me that Coinbase was the one company operating legitimately. I haven't read the complaint so I'm not sure how much merit the charges have. We shall see.
There’s no fundamental reason it would be impossible. Solana Labs would need to file a registration statement with the SEC (https://www.sec.gov/education/smallbusiness/goingpublic/regi...) including among other things a description of its business practices and audited financial statements.
Once they did that, you would be able to buy and sell it at any registered exchange who’s willing to list it. Coinbase, maybe, if they’re willing to accept the costs and regulations involved.
Except that it would exclude a raft of non-US citizens then, i.e. any sanctioned country, Coinbase would also need to become registered as an ATS and their current settlement and clearing processes would need to be re-engineered from the ground up.
For all intents and purposes you cannot register a cryptocurrency with the SEC and then go on trading it anywhere publicly - it doesn't exist.
There's only been a few projects that managed to avoid this: Enigma for example moved to a decentralized network and changed their coin over (so it was magically no longer a security according to the SEC) and the SEC just fined them and made them issue refunds for the project raise.
In some cases, I find it sympathetic. For example, I don't think it's a clear cut moral resolution that people should exclude Iran from buying US goods and services, but they are on the sanctioned list. I supported Obama dropping sanctions on Iran back when he was president.
There's a difference between what is legal and what is moral. For what is moral, there are hardly any absolute answers.
> I don't think it's a clear cut moral resolution that people should exclude Iran from buying US goods and services, but they are on the sanctioned list
Sure. But crypto is an inefficient way to express that policy preference. And it's difficult to comport claims of altruistic intent with crypto's financial incentives.
Registering a security means basically an IPO. The burden is very high and is out of reach for crypto startups that have little revenue and under $1 million in funding.
Took US Dollars ostensibly to purchase bitcoin. A year later when bitcoin had appreciated, I asked for them to sell the bitcoin and give me US dollars back.
They said "no" and said that I fundamentally misunderstood what an exchange was. It exchanges US Dollars into Bitcoin, it does not convert Bitcoin into US dollars.
The SEC issues fines. To them it's taking a cut, to Binance etc, it's operating expenses.
These "enforcements" are more like protection money paid to gangsters. The SEC could have created clarity a decade ago.
It's not in their interest to do so, plain and simple. They are incentivised financially, to persist in creating a lack of clarity, and then randomly "enforcing" inconsistently to extract multi-millions off of effectively approved profits.
If / when they refer cases to the DoJ, it's different. But, typically they don't, because typically most of the players they're going after are doing their best to comply with the "uncompliable" landscape they are facing. Or - they're FTX.
And let's just remember that, always. The SEC, effectively, gave FTX a green light. Maybe the most damaging crypto fail in history likely an outright fraud, of massive proportions and where was the SEC? That's what we're dealing with here.
Looks like the US Govt is going to eliminate the competition before replacing US Currency with its own crypto, likely developed and administered by a third party because the government sucks at building stuff.
HN commenters do not get to decide whether anything is a security. Neither does the SEC. The Courts get to decide. The SEC appears ready to accept what the Courts decide.
Money is not created out of thin air. There's electricity to mine, there's funds investing in crypto, there's fiat used to pay ransoms... All this means real world money got spent.
Considering the EU is unable step up, I think you'll miss the enemy we knew after all is said and done (if there is a significant shift in the leading powers). I'm not wearing rose-tinted glasses about the past (I'm not American), but the up-and-coming alternatives seem real scary.
The EU is the same as the US: pretending to be the land of free but effectively controlled by interests, driven by hidden agendas. Some other countries don't try to pretend to be free nor pretend to work for the people, and maybe less hypocrisy is not worse (China or India). A healthy balance of competition between world powers is much welcomed.
lol I am pretty sure the GP is talking about the era of crypto swindlers who rode the good ideas of liberty, financial diversification, and such into the ground and will all hopefully pay for it
So 1- I was not referring to cryptocurrencies, crypto market is way too small anyway 2- I'm referring to every country except the US, obviously...
From Middle East to China or even Japan, every country is reducing their global reserves in dollars, and diversifying in other (national) currencies. Also, many countries are trying to conduct trades in other currencies than the US dollar.
Basically, I'm just referring to the decline of the US dollar and that's welcome for everybody except maybe for the US government.
I would have written this comment 15 years ago, on the heels of an unnecessarily large military being abused to wage two poorly thought out elective wars. Continued market arbitrage away from wasteful US dominance seemed inevitable, just as the break up of the Soviet Union was.
Now, after economic integration with China has run its course and not produced democracy? After Russia's attack on Ukraine demonstrated that wildly irrational tin-pot dictators still exist, they had just been contained? It would seem that the USD empire is more valuable than I gave it credit for - it's the worst hegemon, except for all the others.
I still do hold hope of reducing the power of centralized entities in the long term. But real change like that has to happen from the bottom up due to fundamental conditions changing (eg individual adoption of cryptocurrencies), which is excruciatingly slow. If this is to be the trend, it will happen over many decades.
There is certainly the open question of whether China will surpass the US military and become a world reserve currency based on the draw of military might alone. But that doesn't have anything to do with decentralization, rather just a different centralizer.
PS treating the diminishing of US power as a foregone conclusion and framing it as a political question of whether the Republicans might "embrace change" (ie overtly facilitate the US's decline) seems like a terribly self-destructive paradigm.
> There is certainly the open question of whether China will surpass the US military and become a world reserve currency based on the draw of military might alone. But that doesn't have anything to do with decentralization, rather just a different centralizer.
You're right, but it does have something to do. The US dollar is the best weapon the USA have at the moment, far more efficient than all the nukes. When the US dollar will be treated equal to the Euro or the Yuan or the Yen, the USA won't have an edge anymore and... will have nothing to lose anymore.
That's when possibly we will see a mass adoption of cryptocurrencies where powerful countries will search to dominate mining, innovation, etc. As long as we have a single country policing the world, adoption will be incredibly slow and mass adoption will not happen unless we have some visionary politicians ...
> framing it as a political question of whether the Republicans might "embrace change" (ie overtly facilitate the US's decline) seems like a terribly self-destructive paradigm.
US dollar is declining, and that will continue, it's not an "if". Suing every crypto company is not going to help either way on the long term. It's less about "facilitating US decline", than whether politicians can look forward, or will keep looking back. Republicans seem to have a more open minded approach
I agree that USD forms a very powerful (and suffocating) global jurisdiction, but I wouldn't describe it as a weapon (Russia seems to be getting along just fine). It's somewhere between soft and medium power, on countries that have committed to the USD empire.
> That's when possibly we will see a mass adoption of cryptocurrencies where powerful countries will search to dominate mining, innovation, etc.
This is cryptocurrency maximalism. I used to believe in this before Bitcoin was even a thing. Now almost twenty years later, seeing it mostly play out as a vehicle for speculation (most of the popular coins are still non-fungible!), I'm not so sure.
> As long as we have a single country policing the world, adoption will be incredibly slow and mass adoption will not happen unless we have some visionary politicians ...
Visionary of what? It was plausible to handwave this multipolar desire back when other countries weren't starting major wars (so countries could exist independently) and the whole world seemed to be democratizing. Now with openly aggressive Russia plus a looming seemingly-competent China, the demand for US military support, and by extension USD, has drastically increased.
> Republicans seem to have a more open minded approach
Don't confuse entertaining foreign interests as "open mindedness". Republicans are further from the incumbent US power structure, and are thus more willing to sell out to foreign power structures.
This is an article about the SEC coinbase announcement. That happened today. So I'm not talking about what happened yesterday, I'm talking about what happened today, because that is what is relevant to the article we are discussing.
so, ummmmm..... like..... bruh. go check what it did today
Crypto is like the worst investment ever: huge legal risk, does not hedge inflation, not a safeguard in crisis, does not benefit from tech/ai boom, does not generate profits. Only downside, no upside, no strengths, only weaknesses.
the chart is only one direction: down
The obvious weakness of bitcoin relative to QQQ demonstrates this. A daytrading pair trade method that shorts Bitcoin in market hours and goes long qqq would have cleaned house over the past year, including a huge win yesterday. i was running this and made a lot.
Who goes against the fed. government and wins? big tobacco couldn't do it. neither could the auto industry.
This is true when it’s going down and false when it’s going up. Do the same analysis of previous years during bull crypto markets and does this hold up?
bitcoin's performance since late 2017 lags QQQ. the rolling 5-year returns have gotten way worse. Much of the gains were from pre-2018. many people five years ago were predicting six-figures by now, nowhere even close.
Huh? BTC is up 56% YTD, QQQ is up 34.5%. Over five years BTC is up 300%, QQQ is 100%. Over life BTC is 7850% while QQQ is 570%. Today QQQ is up 0.12%, BTC is up 0.95%.
I don’t know which slice you want to compare but general holds of BTC have outperformed QQQ significantly, even today it’s done better while it’s two largest exchanges have been sued by the SEC.
bitcoin peaked at 20k in 2017. it is only up 30 percent to 26k. QQQ is up a lot more. over 5.5 years of weak performance. The major problem with bitcoin are the huge declines like in 2018 and 2022. It stopped going up as much anymore either like it did in 2013 or 2017.
But you've picked the very peak of a previous bull run against a dip of a bear market... QQQ peaked in 2021 at $404 but is now at $355 so it's down 15%. This is just as relevant as what you're saying but obviously doesn't capture the whole picture? QQQ dipped from $101 to $20 once which is a huge loss, larger than BTCs largest dip as a percentage, but again that doesn't really tell the whole picture either.
Not trying to be rude or argumentative here, I just really don't understand your point.
> Who goes against the fed. government and wins? big tobacco couldn't do it. neither could the auto industry.
Drugs won the war on drugs. Prohibition is another infamous failure. When the government tries to attack a decentralized commodity valued by the people it always loses.
Pretty much any short is way worse, unlimited downside! If you bought Bitcoin and stored it correctly you would be down less than 100%. Buying S&P 500 is probably less risky though.
Always interesting how crypto prices tank after legal action is announced against exchanges. Isn't the whole point to be decentralized in the first place? Hard to believe the whole dip is due to people wanting to get their tokens off the exchanges.
Well, there is no "whole point," right? You could roughly divide the crypto world into "true believers" and "people who just want to get rich."
The latter overwhelmingly dominate price and volume, and moreover it's the "whales," i.e. a relatively small number of parties.
I suppose I'm something of a "true believer," but what I may want or think is best doesn't matter in the face of the working crypto technology. The incentives are in place and to an extent we just have to sit back and see what happens.
I think it was always 100% clear that cryptocurrencies can't live within the confines of the laws of a sovereign state. Why people registered their exchanges along with the rest of the banking system ? it made zero sense from the start, as does the whole idea that cryptos can be traded in regulated capitalism. Bitcoin needs its own country (or planet) with nukes and all.
Not that I agree with the own planet thing; but yes -- it's odd. All of this was 100% predictable and should have been expected by everyone. The stated purpose of crypto was to get around this; its weird to see crypto fans "get mad" at e.g. the SEC. It's like getting mad at a shark for going after bleeding prey; it's just what was always going to happen.
Mad because some entrepreneurs makes the effort to build legitimate business entities, and what certain governments find to do is any scheme to keep them out of legitimity.
Not that crypto fans would care all that much about these businesses, but there is a need to onramp and offramp given transactions are made in their vast majority in fiat. An exchange run as a business having at least a lot at stake in ensuring continuity is one of the decent ways to get on with crypto.
If it was my call I would skip the perp and earn products to stay clear of regulators when operating in the US, but there must be stories behind closed doors that we don't easily get to know would be my guess.
> Mad because some entrepreneurs makes the effort to build legitimate business entities, and what certain governments find to do is any scheme to keep them out of legitimity.
This isn't what it looks like to me. It looks to me like the entire point of cyptocurrency was to complete route around regulations that these people thought were too onerous. That's not building a "legitimate" business, that's taking a risk and building a business in the hopes that it will end up being legitimized.
I think that if you're taking a big risk and lose, it's unseemly to be mad at anyone except yourself.
Entrepreneur are risk takers, and they do move the needle. We easily forget to thank them.
Would you say the same about music streaming, as companies were launching services without all the due dues, but knew they would finally have leverage once they have a significant user base to negociate deals for legitimate offerings?
Anyhow those big risk takers are not losing because of the roulette factor here, they are hit by some political stance that wants to keep a statu quo, with crypto entering more mainstream at each cycle, legislators work hard at putting a stop to it.
Just read what the head of the SEC said, verbatim "the US does not need other digital currencies". As if it was the SEC to tell what the US need and doesn't need. This whole war against crypto isn't about unregistered securities being sold by unlicensed businesses, it's about using whatever they have to tame what has become a threatening industry, a competition to the traditional financial system. It's about keeping the statu quo.
Yesterday bitcoiners were drug dealers and terrorist, today they are illegitimate investors and exchanges are not following financial regulations, the law, abusing innocent uneducated investors. These laws are impossible to navigate, after countess demands from businesses and those competent in that tech along with the law: Provide clear direction and regulations for a legitimate crypto field. But no, let's sue businesses who insist to operate and keep the rules impossible to adhere to so that we can sue, shut down, after the demonising that stopped working so well after a while.
I would like to be less one sided but the simplistic views on the crypto situation can only make me more radical in the view that the whole thing will be, or should be some may say, absolutely not regulated. Those who get into it don't want some imposed pseudo protection, they just demand the freedom of money. If its the SEC or the danger of being rug pulled, more and more will chose the second.
> Entrepreneur are risk takers, and they do move the needle. We easily forget to thank them.
You can, and should, do that without playing fast and loose with the law.
> Would you say the same about music streaming
Yes. As well as a lot of other companies such as Uber. Breaking the law seems to have become normalized in SV culture as a good and normal practice for startups to engage in. This is one of the many terrible things about SV business culture.
Cryptocurrency is one of a small handful of things that colorfully illustrate one of the ways our industry has gone very, very wrong.
Right, and as I was trying to say below, of the egregious ways law-breaking has occurred in SV, crypto strikes me as one of the theoretically least harmful, in kind of a caveat emptor way?
E.g. Google etc. violated intellectual property rights; Uber et al broke "rules of the road" and other liability related issues, real people stuff.
Crypto? Strong argument of "if you don't like it, don't use it?" It absolutely sucks, but you could argue most of the people who got harmed by it were looking for a quick buck, something about "you can't cheat an honest man."
(Again, I don't actually fully subscribe to this, I think it's still bad to prey on people with money problems, but I still think its worth considering)
No, I respect crypto people much more than music streaming, which was and is guaranteed exploitation and screwing people over. At least with crypto, it's at least plausible that you actually might help people.
Exactly this! For whatever reason I have this image of guy in a wetsuit and surfboard looking at a big wave coming in and being like "whoa, what's this? how dare it!"
it's not like these onramps served the real purpose of digital currency. People don't buy bitcoin in order to pay for services, they buy it to speculate. Bitcoin could succeed even without onramps; digital workers can easily accept bitcoin if they care, which over time will be traded with goods in the physical world with other people who care. That's grass roots deployment, not VC-backed "legitimate" ponzi exchanges.
I do however understand why people are mad. To me it seems that crypto is to GenZ what Real estate was to boomers. It's about building generational wealth in a time of extreme inequality where most other avenues have been closed. It may come back for that, but it has to be built outside the confines of state-regulated money systems
The offramp / onramp is necessary so long as we have two systems, we need a gate between the two, even if crypto had 10 times its current level of trading transactions, as in trading of good or services for crypto, there would still be a large imbalance where more income would be taking fiat in. Adoption is happening, surely less so or far slower in the developed nations like in the US, but is not contracting globally. Unless all fiat currencies were to suddenly collapse, the bridge is needed. And, even if the wildest adoption was to take place, there will likely still be centralised issuers here and there, some countries sitting on paper money which would make off ramping a very long term need.
Interesting comment, I like the parallel with the boomers era. Crypto may just take over once throw genX take over in far greater numbers, get elected, and the few old recalcitrant putting obstacle get cornered.
"Valued" is carrying a lot of weight there. Crypto's stated PURPOSE is to get around traditional banks; that banks don't like it doesn't actually equal "not valued."
Yeah, but let's be real. I 100% believe in the big picture theory of crypto, but it's not at all unreasonable for the parties in charge to see what's actually happening to real people and to be like "this is NOTHING but scams."
I don't have a lot of sympathy for whingeing about "the SEC is treating us unfairly." They're doing their job. If "crypto-at-large" wants to be an acceptable business thing, then it needs to better protect people from getting scammed; present regime of crypto things have nearly absolutely failed at this.
A crypto currency business however may be engaged in trading of crypto currencies which are negotiable financial instruments, and a stable coin that is a claim on a traditional currency is an example of that. A stable coin bears a direct relationship to a bank note. It is a claim on something else. It is not really an investment though, so not much of a security.
And then of course there are more creative negotiable financial instruments which are definitely securities. Options, derivatives, swaps, futures, and the like.
The Supreme Court has a broader definition of securities, that involves a promoted investment in a "common enterprise", but it is unclear that a commodity currency really is a common enterprise like a corporation is for example. It seems unlikely to me that Bitcoin as such would even meet that definition of a security. But other products offered by crypto currency exchanges might.