Once again, affiliation with #cryptocurrencies is a tell that a company is shady as hell. The pattern just keeps repeating.
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@LouisIngenthron I wouldnt quite go that far. No doubt there is plenty of scam in crypto, all that means is you are required to do your own research and be cautious. But there is also plenty of legitimate use for blockchain and crypto. It isnt fair (or useful) to assume crypto means bad actor.
@freemo I acknowledge there are legitimate uses, but they make up like 1% of the crypto industry. It's demonstrably dominated by scam artists because the very nature of the industry (decentralized, unregulated, no take-backs) is extremely conducive to fraud.
And there does seem to me to be a very strong correlation between companies that operate less-than-honestly and companies that integrate crypto into their products/services.
As with most powerful tools it can be used for harm or good. Typically the more powerful and useful a tool is the more it will attract bad people, because like all powerful tools it can be used to great utility, and bad people will take advantage of that utility to their end.
As for why it is so grossly leaning towards bad actors, thats largely due to the regulations that have continued to be put in place for years that prevent its use by legitimate actors, which have pushed them out of the space.
@freemo What? Such as?
@LouisIngenthron Tons of them... Years ago the first crypto crash was caused by US regulations that prevented the use of crypto in ordinary transactions (so you cant use it in stores int he US)... more recently regulations have made it illegal for my bank, one of the biggest legitimate actors in the crypto world, to stop supporting crypto. To quote a representative from the bank:
"As a result of the evolving regulatory environment and the uncertainties around the crypto market in the U.S., we’ve taken the difficult decision, together with our U.S. banking partner, to suspend access to cryptocurrencies through Revolut in the U.S."
Sadly the USA has went out of its way to regulate crypto out of existance and create exactly this environment, where it is virtually illegal to hold or use crypto so that only those who dont care about what is legal is left using it. This has been a very clear and obvious pattern out of the US government in an attempt to kill crypto.
@LouisIngenthron Sure, though I said regulation, not law. The regulating bodies (like the SEC) directly issued regulations using their autonomy. They are similar to laws but not issued directly by congress but rather issued by the agencies congress has given autonomy (similar to laws around drugs re:FDA).
So here are some of the notable events.
On February 8th 2018 the SEC, as part of their testimony at U.S. Senate Banking Committee declared that all cryptocurrencies, regardless of utility or function, are to be treated as securities. This basically meant a few things 1) you couldnt use it as money anymore 2) you cant legally buy many coins unless you are an accredited investor. This is ultimately what lead to the 2018 crash, and is probably the most impactful regulation that kills good-guy crypto (as it literally makes most crypto illegal to own at all outside of rich people).
This was reiterated in a speech given by a SEC representative a few months later just to make sure it was publicly known.
In october 2020 this was upheld in court with the kik case (I think its Kik vs USA or something like that). They sold coin in an ICO to people who were not accredited/registered investors. They were found guilty in court. Again this pretty much made it virtually illegal to own many coins or use them and trade them freely in the USA.
A similar case in December 2020 against ripple also upheld this ruling.
January 2022 the SEC proposed amendments to the Exchange Act. md a few more a few months later. These changes were sweeping and effectively made DeFi on the blockchain as we know it (like unicorn) illegal. The proposals would make the definition of an exchange so broad as to include DeFi, and require things that are impossible of blockchain based DeFi (like an owner, who registers and controls the system, rather than smart contracts being autonomous). This effectively put the last nail in the coffin, now it isnt just illegal to buy coins in an ICO or from an individual, but even from the block chain itself.
I dont have time to write a book, there are soooo many other regulations or proposed regulations that are at play here. But above are some of the most major ones
@freemo Yeah, I understand the difference; that's why I asked for a law *or* regulation.
As I understand it, those rulings do not apply to all cryptocurrencies. They apply to crypto tokens *sold as investments*. In other words, they were sold to customers with the promise the value will rise, and it's that advertising that ultimately got them in trouble.
A cryptocurrency that exists for stability (or at least doesn't actively advertise itself as existing for the sole purpose of going up in value) would not be beholden to such rules.
That all makes good sense to me. It's how it should work, and wouldn't prohibit using crypto for legitimate purposes.
> As I understand it, those rulings do not apply to all cryptocurrencies. They apply to crypto tokens *sold as investments*. In other words, they were sold to customers with the promise the value will rise, and it's that advertising that ultimately got them in trouble.
Sort of, you are thinking of the criteria for the Howey test. There are 4 criteria, but the one you are thinking of is that there must be an expectation of profit. This does **not** mean the expectation has to come from the seller though. As long as those engaging in the exchange generally do so because of a belief it will be profitable, then it qualifies. The expectation may come from the seller, or it may simply be the general understanding of the population.
This should be obvious because if I sell you stock in a company it doesnt stop being a security if I, as the seller, tell you the stock isnt likely to be profitable. It is still, by its nature, a vehicle to investment.
> A cryptocurrency that exists for stability (or at least doesn't actively advertise itself as existing for the sole purpose of going up in value) would not be beholden to such rules.
Incorrect. UST (Terra USD) is a stable coin with a fixed price of 1 USD to 1 UST and is by design stable. This is however has been explicitly stated by the SEC to be a security.
> That all makes good sense to me. It's how it should work, and wouldn't prohibit using crypto for legitimate purposes.
As per the above you are mistaken, so I guess no longer makes sense?
@freemo Except Terra isn't backed by anything and hasn't actually remained pegged to the dollar. Plus, it's explicitly linked to Luna, which was, for all intents and purposes, an investment coin. The SEC went after them specifically for "misleading and deceiving investors". The guy who created it is on the run from Interpol.
Your example proves my point.
Pl now you've just moved into intellectual dishonest debate (though perhaps not intentionally). At a minimum its moving the goal post.
So few points:
1) We are talking about the classification of a coin as a security, NOT if the coin engaged in fraud or not. While you would be perfectly legitimate to talk about fraud and why the SEC may be ok in persuing UST, that is also a conversation for another time. The fact is it was listed as a security, despite in no way being an investment vehicle.
2) The criteria for something to be considered a security has nothing to do with if the price has, at some point, fluctuated. As we covered it is about if the token is viewed as a vehicle to investment. The fact that its price has fluctuated slightly at the time of its classification is irrelevant since it is specifically built NOT to be an investable asset.
3) The classification of UST as a security happened **before** anything you mentioned, before its crash in price, before the fraud was revealed, etc. So all of this is a moot point no matter how you slice it.
4) The price of UST remained stable right up until the SEC decided to make it a security.. in other words it only became a coin where price fluctuated significantly AFTER classifying it a security, not before.
5) The idea that they commited fraud is debatable. The accusation has been made, but no conclusions in that regard has been made (the rulings havent been made as to if they are actually guilty or not)... so this is moot.
6) The connection to other currencies is valid, but doesnt make the UST itself all of a sudden an investment vehical just because there is a separate currency that IS an investment vehicle that somehow relates to it. The fact remains UST was never and never will be something people buy and sell with the expectation of it being an investment. So clearly your original statement that only coins sold with the claim of profit are securities is clearly false.
@freemo Can you cite an actual law or regulation that does this?