Well, Gary Gensler is on record in 2023 saying Bitcoin is not a security. So, I don't think it's accurate to say "probably all." In previous years Ethereum had also been described as not a security, but that opinion seems to have shifted with time.
It's still not super clear to me why he says Bitcoin is not a security, but that Ethereum would be a security. I'm fine with whatever ruling as long as I can understand how it's being applied. I feel pretty good about considering stable coins securities. I'm less certain about NFTs since there is receipt of a (semi)tangible product.
I wonder if the recent introduction of ordinals to Bitcoin will result in his opinion on BTC shifting soon, too?
> Take that further to airline points and Chipotle points.
No-one is holding those with an "expectation of profit". Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.
In general I'm on the "many crypto tokens are securities" side here. However this isn't right:
> Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.
Stablecoins are very frequently used as transfer tokens for remittances, wages and ecommerce. We pay overseas staff in USDC for example (it's quicker and easier than bank transfers).
Stablecoins are supposed to be stable, and not rise or fall. There is no expectation of profit for a stablecoin like USDC. And USDC doesn't pay interest. People use it for stability and for payments.
It is not the code of the USDC stablecoin paying 5%, so that reward is something else. Maybe the exchange wants to get many people sending coin to them so their asset base looks big for ... some purpose?
Also Ethereum switched to proof of stake. Which means that the "stakeholders" (shareholders) are voting what transactions go into the ledger. Bitcoin is proof of work still.
With proof of stake, a staker eventually gets an opportunity to follow the validation rules and put some transactions in a block. If they don't properly follow the rules, they will get slashed. If they don't submit a block when it is their turn, they will get gently slashed.
In proof of work it is a free-for-all with whoever has the most hashing power winning block submission more frequently. If they submit a block that doesn't follow the validation rules they keep all of their (physical silicon) hashing power and the block is ignored.
A majority of bitcoin miners can also prevent transactions from entering the ledger at cost to themselves, just like Ethereum stakers. It's a misconception that Ethereum works via stakers voting the way people normally think of voting.
Gensler also said in 2018 that 3/4 of all cryptocurrencies were NOT securities. He likes to continuously expand his power by insisting everything is a security and falls under his jurisdiction.
Bottom line is that the founder/owner of Ethereum has said very clearly that investing in ETH is investing in the Ethereum team. Bitcoin Cash has no such "team" you invest in when buying BCH. I think thats the difference.
Well, I had started the conversation about BTC not BCH. Personally, I feel that BCH has more of a team associated with it than BTC.
That said, none of what we're talking about addresses the fact that, in 2018, Gensler said, quote, "Bitcoin. Ether. Litecoin. Bitcoin Cash. Why did I name those four? They’re not securities."
Since then, things have changed, and now Gensler only highlights BTC as not a security.
If the inflection point was various teams speaking publicly about their usage of funds, and those talking points shifted Gensler's opinion, then OK, but I am not aware of an official moment when his sentiment shifted. As another commenter highlights, it could also be the transition to POS for Ethereum, but, again, I am not aware of Gensler highlighting the transition as the inflection point and this rationale fails to explain LTC and BCH.
To me, it feels like chasing opinion and public sentiment - not following rigid, established legal patterns.
> To me, it feels like chasing opinion and public sentiment - not following rigid, established legal patterns.
The sentiment is an integral part of the established legal pattern - the Howey test is about "expectation of profit".
Even if based purely on vibes, I think the man on the Clapham omnibus might well say: someone buying Bitcoin today, or Ethereum in 2018, is not expecting to profit from the efforts of their respective dev team, whereas someone buying Ethereum today is expecting to profit from the efforts of their dev team. (I mean, I didn't even know Bitcoin still had a dev team - isn't it basically "finished" at this point, and has been for years?)
At this point Ethereum doesn't really have "a dev team." There are about ten independent client teams, who have public meetings to come to agreement on upgrades, plus an open research community.
When you say that an ETH buyer is "expecting to profit from the efforts of the dev team" which wasn't the case in 2018, are you talking about proof of stake? Because it's not all that different from proof of work. You run a client, process transactions, and get rewarded for doing that. Instead of buying a server rack you stake some ETH, but what you get rewarded for is running the protocol.
You don't get rewarded for just holding ETH. Unless the value of ETH goes up, but that's the same with Bitcoin and with Ethereum in 2018.
The Howey test, incidentally, is also about an investment contract. That's why an equity is a security, but a bar of gold is not, even if you bought the gold as an investment. Lack of contract is why the SEC lost their case against Ripple recently.
> When you say that an ETH buyer is "expecting to profit from the efforts of the dev team" which wasn't the case in 2018, are you talking about proof of stake?
Not proof of stake qua proof of stake, but the fact that substantial changes to ethereum (like proof of stake) - things that change the usability of the network, and so could be reasonably expected to change the value of ethereum tokens - are still being worked on.
> The Howey test, incidentally, is also about an investment contract.
No, it's the definition of an investment contract. If it included whether something was an investment contract that would be circular.
> That's why an equity is a security, but a bar of gold is not, even if you bought the gold as an investment.
No, the reason gold isn't a security is there's no common enterprise and, more importantly, no efforts of others. You might buy it as an investment, but the investment isn't because you think the gold devs are going to add new features that make gold more useful.
> Lack of contract is why the SEC lost their case against Ripple recently.
Whatever you think about Ripple or cryptocurrency in general, that ruling was just utterly bizarre. You can make reasonable arguments for why these things aren't securities (even if I don't agree with you) but that judgement wasn't it. It's not a precedent for anything, it's just crazy.
Isn't BTC controlled by one single very centralized group, Blockstream? I could be wrong but I thought Adam Back's Blockstream long ago hijacked the GitHub repo and took full control of that project.
Bitcoin along with most cryptocurrencies (broadly priced in it), is controlled by a small cartel of deeply entrenched miners and large wallet stakeholders who were involved early on and have constantly consolidated their positions both over infrastructural custody, that is, mining, and control of liquidity.
There's a staggering amount of illegal mining that is never accounted for in the economic models used to determine how much control these folks have over liquidity; this entire conversation is just broadly discouraged and for whatever reason seems to have attracted very little interest even from the crypto critics out there.
The number one weapon the crypto cartel uses to shut down dangwrous critical turns developing in the story, is their ability to move the last trade price almost at will, completely opposed to any building critical narrative in order to undermine it, knowing full well that the sympathy of the media reliably lies with "number go up", not "number made up." And they can do this because they're sitting on an enormous warchest of unsold coins mined when prices were far cheaper, which they can use to fund their operations while they throttle back current coinbase sales at current prices to prop up the price.
> crypto cartel [...] ability to move the last trade price almost at will
I think there is lots of manipulation, but could you elaborate on how you can, for example, pump the BTC price up when you hold lots of BTC, but no USD? Leveraged futures on crypto-only exchanges?
Miners are the only source of continuous downward pressure on the price, there are other sources of course but miners are nearly clockwork steady sellers, so the market gets accustomed to this effect. all they have to do is let up a tiny bit. the standard narrative is that they can't afford to do so because of the balance between diff rate adjusted mining costs and market price of the mined coin. What I'm pointing out is that because of the massive amount of head start they had from a decade of largely unpoliced mining wherever they found an "opportunity" to do so, legally or not, (as well as continued theft of resources to mine even today), they have plenty of extra reserves to use to cover costs, (assuming that they even pay market cost in the first place - see also: corruption) selling coins at today is prices which were mined at one, two, three+ years old cost rates or less.
This is not even getting into the circus known as tether, which I believe is a significant factor but actually quite a bit of an over-stated red herring serving (along with constant exchange clownery) as a distraction away from the much bigger influence that is the enormous subjective control miners have over the order book price of the coin.
100 million baht in 2 years? So about $1.5m USD in a year.
That's not exactly "staggering" or significant in the context of the Bitcoin network. Unlikely that such operations have any meaningful control over the network or liquidity, even if it's just 1% of what's known.
You seem to think that these sorts of operations are somehow connected in a large coordinated cartel the controls the industry, but given that they're illegal, isn't it far more likely that these "black market" operators are fairly small by comparison to the legitimate players in the US?
The mining ban in China a couple of years back gave us a pretty good indication of the size of the legitimate industry in that country, and it absolutely DWARFS the biggest of the illegal examples you gave.
Interesting way to word it too, "illegal mining". They're just stealing electricity. If they used that stolen electricity for heating, you wouldn't call it "illegal heating", would you?
So you read the article, as well as the quote that I put above and therefore you know that this is estimated to be only 1% of the illegal mining done in _Thailand_ alone, and this in just the past couple of years when visibility of cryptocurrency has been well established even in non-tech circles.
It's been happening ever since crypto mining, especially Bitcoin, existed. Long before most anyone knew what mining was, or knew to look for it being done stealrhily on someone elses's dollar ...or baht. I didn't say I condone stealing electricity for any purpose, but there's a particular hypocrisy with crypto people who claim that mining costs chase the hash rate and difficulty adjustments ensure that everyone has a fair shot at winning a coin base. Obvious nonsense.
It's hypocrisy that crypto people, who like to think of themselves as some sort of sophisticated financial visiinary class, are so hopelessly naive that it would never even occur to them to consider that being rationally self interested will inevitably and swiftly devolve into outright theft, and the obfuscated consolidation of power favors the venal corrupt and those who are willing to benefit from wholesale theft, which is why such people are entrenched at the center of this so-called decentralized system.
this logic would apply to literally every facet of human existence if it were true; your argument has devolved into "people would make more money if they were engaged in criminality and didn't get caught, therefore everyone eventually devolves into a criminal."
the papers studying the amount of black market activity in Bitcoin have consistently shown Bitcoin to be cleaner than the economies in virtually every country on the planet, except for the occasional ultra-clean tiny european state.
literally every bitcoiner since the first roll-out of the Silk Road and the resulting senatorial attacks on them, have been ultra-interested in exactly how much of their hobby is black market and how much is criminality. literally every single one of them is heavily invested in knowing more about the nature and extent of bitcoin criminality. to say that it didn't occur to them that self-interested criminals are operating in BitcoinLand is .. stupid.
It very may well be. I don't own any BTC and I had limited awareness of Blockstream until you mentioned it. I feel that this would make a stronger case for it being considered a security, though, no? And yet on September 27th 2023 Gensler reiterates Bitcoin is not a security:
No one controls Bitcoin, because it's a protocol. Bitcoin Core is the reference implementation, but there are others, and anyone can create new implementations if they wish. Also, the Bitcoin Core maintainers can't just change something on a whim, because users would then switch to another fork. Maintainers (or miners or other groups) can't force their changes on users, because everyone can decide on their own which version of the software they want to use.
BIPs are discussed for years, before (and if) they are implemented, and basically everyone needs to agree on them, because no one wants to fork the blockchain, which could be devastating.
This is completely false, what's your source? Also, it has never been the case. I recall that at some point around 2015, about 4/9 persons with commit access to the github repository (please note that this is a far fetched attempt to find out a metric for "controlled") were co-founders or employees at Blockstream, but right now I am not sure there are more than four or five, out of ~30.
Seems to me that one can make an argument that the following people, named in bitcoin/src/kernel/chainparams.cpp, control BTC:
vSeeds.emplace_back("seed.bitcoin.sipa.be."); // Pieter Wuille, only supports x1, x5, x9, and xd
vSeeds.emplace_back("dnsseed.bluematt.me."); // Matt Corallo, only supports x9
vSeeds.emplace_back("dnsseed.bitcoin.dashjr.org."); // Luke Dashjr
vSeeds.emplace_back("seed.bitcoinstats.com."); // Christian Decker, supports x1 - xf
vSeeds.emplace_back("seed.bitcoin.jonasschnelli.ch."); // Jonas Schnelli, only supports x1, x5, x9, and xd
vSeeds.emplace_back("seed.btc.petertodd.org."); // Peter Todd, only supports x1, x5, x9, and xd
vSeeds.emplace_back("seed.bitcoin.sprovoost.nl."); // Sjors Provoost
vSeeds.emplace_back("dnsseed.emzy.de."); // Stephan Oeste
vSeeds.emplace_back("seed.bitcoin.wiz.biz."); // Jason Maurice
Those are the seed nodes for finding peers in the network when you're starting Bitcoin for the first time, and there aren't other known peers. Sure, you could ask around for additional peers through other channels.
Btw, I couldn't find these on the newest version, so I'm not sure how they do it now.
The SEC’s first strategy was to go after the companies creating the crypto. Most that are targeted settled and exchanges delisted those crypto assets that were ruled to be securities - registered or not - then the SEC went after well funded, more professional and less risk averse ones and have been losing in court.
So this is a war of attrition so the SEC then just went with blanket statements and goes after the exchanges, without telling them which ones are securities. The SEC also has not been winning at this second strategy.
All anybody has been asking is for the SEC to tell them the difference between the assets. How can a crypto asset be issued compliantly as only a product, and when does it transition into not being a security if so?
The SEC has fumbled over its words as if trained on 10 years of HN crypto comments, and the courts say its arbitrary and capracious.
You hit the nail on the head here. A judge or jury is unlikely to side with the SEC because the kraken will undoubtedly mention the dozens of letters they sent to the SEC basically saying they want to be in full legal compliance and will remove any securities from their exchange.
The SEC will argue they just enforce the law and aren't required to tell them how to comply. Buuut they are professionally obligated to tell them, especially when the law is so ambiguous. It's obvious the SEC is being a bully, so the judiciary and public will hopefully side with Kraken.
It’s because laws set out what are securities. A distributed ledger of cryptographic tokens is by definition not a security.
So the SEC just claiming they are isn’t going to win any court. Their goal is really to drain funds and get companies to settle. Because the SEC isn’t supposed to determine what is a security
the security law regulates transactions, that is sufficiently enough to cover cryptographic tokens and the ways they are settled, and thats not where the SEC loses
they lose because they cant articulate when they are securities and when they're not securities
their theory does play into a trap you pointed out, in that there are plenty of non crypto products that function the same way - limited supply runs sold by corporate issuer where a ton of speculator collectors hope the price goes up based on the actions of the issuer - that the SEC never bothered with. Either they're all securities or none of them are. The SEC has been asked to explain the difference and fails. People on this forum played devils advocate on a supposed legal difference just because they dont like crypto, but their arbiter - the SEC - fails to find those points strong enough to argue its position at all! the courts and the senate are like “wait, you don’t have an argument at all? good lord”
but like an abusive spouse it just keeps circling over the same word salad of “you’re supposed to know what I want, its been sufficiently clear the entire time” instead of articulating themselves using their words, to the shock of the couples counselor who already had a bias towards the spouse but can’t come up with anything to help their ridiculous case
You can read the act yourself, a cryptocurrency (depending on the type) is not a security by the definition provided. Nor does the cryptographic token have an issuer. Quite literally, most crypto has none of what’s defined under the SEC scope.
That said, sure _some_ of the crypto tokens would could count as securities. But even then it’s not clear the exchanges should be the ones being targeted.
> The term ‘‘security’’ means any [...] transferable share
Funny, that describes virtually every cryptocurrency token I'm aware of.
But for all practical purposes, you shouldn't be looking at the definition in the law itself, you should be looking at the case law behind it, where of course the ruling test is the Howey test... "an investment of money in a common enterprise with a reasonable expectation of profit derived from the efforts of others."
How is it a "transferable share"? When I buy a crypto token what do I own a share of? And you can't say "a share of the total supply of tokens" because by that definition anything is a security, e.g. a gold coin would be a share of the total supply of gold coins. And it has been clearly decided by the courts that such things are not securities. Even things that are much more "security" like, e.g. a piece of a syndicated bank loan, are not considered securities.
Your interpretation is far removed from reality but I appreciate the enthusiasm
the act regulates the nature of a specific transaction and therefore does not need a description of the asset itself. It never needed to imagine crypto, or fungible orange groves as the howey test was about, or anything.
Presumably Coinbase and Kraken had to register as banks to offer FDIC-insured accounts (and debit cards)?
Non-Security Deposits are interest-bearing products that are not securities.
Non-Security Deposits: CD Certificates of Deposit, MMA Money Market Accounts, Treasury Bills, Savings accounts, Checking Accounts
Do banks require SEC registration to offer interest-bearing Non-Security Deposit products?
Have banks ever been required to qualify interest-bearing products as securities contracts, after qualifying each product for list in each US State of operation?
> The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks.
> Any broker-dealer that is a member of a national securities exchange or Financial Industry Regulatory Authority (FINRA) and handles orders must report to CAT. Eligible securities include NMS stocks, listed options, and over-the-counter (OTC) equity securities.
Whether USD deposits have FDIC protection (250K (x2 *) or the balance of the account, whichever is lower; since the Great Recession [1] (before that it was 100K per account))
In 1999, GLBA [2] changed the 1933 Glass-Steagall rule [3] that had prevented banks from investing Savings deposits in order to ensure that they would have enough to prevent another run. (As depicted in "It's a Wonderful Life" (1946); Clarence the angel or Mr. Potter's Potterville)
I'm not sure that it's anywhere explicitly stated that the banks' socialist FDIC corporation justified allowing investing of savings deposits. They created a large shared prepaid credit line for themselves in order to operate safely.
Banks invest in non-securities; without any agreement for future performance.
Banks invest in treasuries, which are tokenizable non-security deposits.
(Some time later, the dotcom boom busted and the US went to war/oil/defense instead of clean energy (like the solar panels that were on the roof until 1980 (due to the oil crisis CPI hostage situation, when it became necessary to defensively meddle in the ME with blowback left for Obama to handle, and not pay for)))
> How is client cash stored at Coinbase? The vast majority of Coinbase client cash is stored in FDIC-insured bank accounts and U.S. government money market funds to keep it safe and liquid. Like all assets on Coinbase, we hold client cash 1:1 and your assets are your assets.
> Are balances stored on Kraken insured? Cryptocurrency exchanges do not qualify for deposit insurance programs because exchanges are not savings institutions. Exchanges are not even meant to be cryptocurrency wallets.
There is yet no FDIC protection for any stablecoin, and yet no CBDC (just FedNow), but US banks are specifically allowed to provide crypto custody services.
They offer many cryptocurrencies.
The SEC has indicated that it considers most, probably all, cryptocurrencies to a be securities.
The writing has been on the wall for a while -- Coinbase got a Wells letter, basically a "lawsuit is coming" warning, months ago.