It would be monumentally newsworthy if there was clear guidance that Bitcoin and Ethereum "weren't securities" (more generally: that businesses that simply deal in Bitcoin were generally outside the purview of securities regulation). But we do not in fact know that right now.
No expert believes that you can look at the list of current enforcement actions and reliably predict the SEC's next actions. They could keep taking out scammers for the next several years, getting practice by picking out the low-hanging fruit. Or, they could at literally any moment come down like a ton of bricks on the industry's most mainstream participants. We simply don't know.
What we do know is that "coin-mediated" finance is enabling thousands of people to launch investment-driven businesses who would previously not have been able to do that before, not because of a lack of technical ability but because the laws made it prohibitively expensive. Those laws have not been repealed. A lot of reasonable people are waiting for the other shoe to drop.
If the SEC was going to come down like a ton of bricks they would have done so already. I could be wrong, but their actions seem to demonstrate that they're taking a very measured, careful approach to coming up with a regulatory framework.
My comment was a reaction to other comments, not the statement from the SEC - which actually doesn't say much either.
I definitely wouldn't feel comfortable proclaiming with any certainty that Bitcoin or Ethereum or even ICOs were definitely going to fall afoul of the SEC. My understand is that the SEC is generally a lot smaller than "we" think it is and it's sort of a random function. Cryptocurrency is super important to HN, but the SEC's definition of "systemically important" is different than ours.
Their mandate is to protect unsophisticated investors. That's why they weren't particularly interested in Madoff, and why the rules are so much laxer if you target "accredited investors."
Given that mandate, I think it's highly unlikely that they're going to go after romping, runaway successes. They'll focus on blatant pig-in-a-pokes.
I'm using quotes because that's code for unsophisticated investors, the very group the SEC is supposed to protect.
Could you elaborate? Why do you think that the SEC has made a final policy decision on crypto/ICO?
The SEC refers people to the Howey Test in all of their statements, which is fairly clear guidance that they don't consider Bitcoin to be a security. With something like Ethereum they're not going to say, since something can alternate between being a security and not being a security, so any sort of specific guidance wouldn't be especially meaningful.
It's ambiguous what 'it' refers to (comment vs. the article) in your sentence. If you meant the comment, then I disagree because it doesn't pretend to say something 'important', it just points out that the article doesn't introduce anything new for people doing things that aren't clearly a scam under existing laws.
If you meant the article doesn't say anything important, then I agree and I don't think the comment you replied to says anything different.
Agreed. The main thrust of my comment was that this is a non-article, and yet it seemed to be inviting commenters to lay out their pet theories on the validity of cryptocurrency as though they were validated somehow by the article's contents.
Perhaps we can tap the Winklevii's expertise to audit the SEC for malfeasance
What?
I will admit I initially took offence, though, because I rather like tptacek.
Sorry, I'm a coin skeptic.
If you start badmouthing Canadians, though, different story bub ;-)
Because they can afford to take the hit if the investment fails.
At least some modification of who can be an accredited investor. Keep the current 200k income or 1 million in non-residental assets. Add some kind designation where you can declare an asset set aside for more risky (accredited investor level) investments and, after a year of sitting to prevent rash decisions, you are allowed to invest those assets in the risky investments. That would at least prevent people from cashing out there IRAs into obvious bubble situations and pyramid schemes and loosing all of their retirement assets. A lot harder for a con man to keep you fooled for a whole year.
Without this rule, grandma and grandpa would be constantly bilked by investing their $50k into bad investments.
The poor can easily invest in a risky venture. Buy into an index fund.
>"This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities. Since Exemption 7(A) protects the records from disclosure, we have not determined if other exemptions apply. Therefore, we reserve the right to assert other exemptions when Exemption 7(A) no longer applies,"
For instance, the SEC threatened to prosecute the DAO [1], which was certainly not a "clear unethical practice", or "flagrant violation" of securities law -- just a bunch of people voluntarily putting their money into a pool to vote on what to do with it. They could even withdraw their money at any time.
[1] https://www.sec.gov/litigation/investreport/34-81207.pdf
I mean... it sounds to me like they did their due diligence. The PDF contains an in-depth look at how existing securities law intersects with what this group was doing. That's exactly what the SEC is supposed to do.
DAOs are new and unfamiliar. They looked at what was going on and decided not to pursue further action. That seems quite reasonable to me.
The DAO was hacked in June of 2016, and the SEC didn't release that article until July of 2017.
https://en.wikipedia.org/wiki/The_DAO_(organization)
When the SEC says:
> The Commission has determined not to pursue an enforcement action in this matter based on the conduct and activities known to the Commission at this time
What they mean is:
> We chose not to beat a dead horse, because it's already dead.
The tl;dr is that they are clearly securities under existing law. Now that the SEC has clarified that fact companies are free to issue Tokens if they comply with the law.
The SEC charged Bernie Madoff's auditors after the scheme had been revealed [1]. In respect of the DAO, the SEC appears to be taking a "wait and see" approach. (With ICOs, on the other hand, we've seen enough.)
Sure, they can pivot into rabid dog mode at any moment, but they’re allowing things to proceed while being aware that it’s gaining more mainstream appeal.
The sort of posture you’re advocating is the same sort of scaremongering as the “this is all a Ponzi scheme that will blow up any day now” types are spewing.
I can only judge them based on their actions to date, not what they might do in the future.
For example, in "SEC v. Jon E. Montroll and Bitfunder", the individual in question was accepting "investments" in his exchange that were clearly securities (probably fitting the definition of a public offering). He also failed to report a massive theft of Bitcoin and misappropriated customer funds.
This guidance does not claim that Bitcoin or Ethereum are securities.
This is the birth of a new industry. It's unregulated, messy, and the massive amounts of money involved have invited all manner of fraudsters and scam artists - just like the stock market did 100 years ago. There will be a regulatory shakeout and we can all hopefully get back to the business of building a useful ecosystem.