Of course Coinbase will say they're not securities.
All crypto should be treated as securities. The rampant insider trading, lack of transparency in project finances and decision making is insane.
I've consulted for a few crypto projects. In most of them, the founders completely misused ICO funds for personal gains and traded their own tokens with inside info.
If your project token is available to be purchased and sold in the US, they should be subject to the same rules other securities follow.
What blows my mind is how laissez faire regulators have been when it comes to these scams. Countless billions of dollars and thousands, if not millions, of man hours went into this scam economy. It's just such a waste of time and resources, and it flies in the face of the idea of market efficiencies.
China got this right by banning cryptocurrencies. It seems like the US is happy to wallow in its own crypto scam waste while other countries are more efficient with how they allocate resources in their economies.
> It seems like the US is happy to wallow in its own crypto scam waste while other countries are more efficient with how they allocate resources in their economies.
You probably aren't from the US, but we don't have a top down rule of how resources are allocated like other countries. It is a free market, so if someone wants to waste their resources building electric cars or a search engine - they are more than welcome to do so.
Just because you can insider trade doesn't make something a security in my view. You can do insider trading around gold or palladium or any other commodity for instance. You can do insider trading with property and land. You can even do insider trading with currencies.
They're not securities because you can insider trade them -- they're securities because they fairly clearly meet the Federal definition;
> The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
>Just because you can insider trade doesn't make something a security in my view.
I'm not an expert on security law. All I know is that there needs to be far better regulation around crypto whether it's labeling them as securities or creating brand new regulation. It's just way too easy to scam people in crypto.
What a wonderfully content-free discussion on hacker news regarding crypto currency. Again. They're all the same. Crypto scammers. It's so tiresome.
At least acknowledge the difference between ICO funds, NFTs, native tokens, inflationary or deflationary assets, liquidity pools, slush funds with voting and governance attached.
Even getting some nuance on the different ways in which one thinks different crypto assets are a scam would be nice. But here I see no engagement or interest in the particular assets in question or the details of the story. Why?
The thing is that all of those are avenues for fraud and scams. And very little else. Even the apparently honest actors in the space seem to get wound up investing in fraud and scams somewhere down the line.
> It's so tiresome.
Yes, isn't it? Can we regulate this space under the same rules as other finance yet? Or do we need Joe Public to be ripped off for a few more billion first?
Let's note up front that Coinbase also did not engage with the particular assets in question, instead making a blanket statement that absolutely no securities are on Coinbase (but also that nobody knows how to define a digital security in the first place?). A cynical person like myself would see this as evidence that Coinbase knows there's no story to tell about how the world is better off for having these coins listed. But going to the tweet that started this all (https://twitter.com/cobie/status/1513874972552355846) and spot checking the first three coins:
* Indexed says that you'll "gain exposure to passively-managed crypto index portfolios represented by a single token" and references their $2.25m assets under management.
* Kromatika says that they'll be selling some reserved KROM tokens on an ongoing basis in order to fund their project.
* DappRadar says that, by buying their RADAR token, you will help scale their "Dapp store".
The second and third are perhaps arguable, although I struggle to believe that anyone would buy their tokens except as an investment in the future of their platforms. The first is the most obvious security imaginable. This kind of thing is why I don't usually engage with the details of specific coins; at least when we're talking about exchange-listed coins, they all end up being like this.
> At least acknowledge the difference between ICO funds, NFTs, native tokens, inflationary or deflationary assets, liquidity pools, slush funds with voting and governance attached.
They don't want to distinguish between any of that and instead want to blanket all of them and say that they are all the same. Not all NFTs are JPEGs and there is an obvious difference between a 'coin' vs a 'token' where those blockchains which allow tokens, you will see them have ICO launches since 2016.
> Even getting some nuance on the different ways in which one thinks different crypto assets are a scam would be nice. But here I see no engagement or interest in the particular assets in question or the details of the story. Why?
I think the right approach is to wait for the Ripple vs SEC case which will not only determine whether if XRP (Ripple's blockchain coin) is a security or not, but the wider implications on other coins and tokens. But as for ICOs in general, the SEC has already cracked down on unregistered ICOs in 2018, making them illegal in the US.
Overall I don't think you will get a rational response on this site about anything mentioning crypto. Instead, the typical response you will get on HN is always to the extreme: 'All of crypto is scam', 'Ban it all, ban everything crypto, all of it', 'web3 should die in a fire'.
It is indeed the same absolutist nonsense that doesn't add any new arguments other than spreading regurgitated garbage that is recycled from other anti-crypto supporters and repeated here.
> Earlier today, following a Department of Justice (DOJ) investigation into a former Coinbase employee’s misuse of confidential Coinbase information related to listing decisions (...)
If my exchange was accused of having an employee doing something so damaging as insider trade against my customers, I would deny it if it were false, or apologize and promise corrections/reparations if it were true.
Instead, Coinbase does not deny that their employee damaged their customers, but instead spend their effort in denying the legal technicality that could make them liable.
I've made up my mind, Coinbase leadership are scumbags.
Good thing, what the hell does that mean? Good for what purpose?
Obviously they don't deny it because it's true, that's not my point. My point is that even being true, their first concern could be their customers, but it's not because they're scumbags.
Whether these things are securities will be the central issue of the insider trading case [1]. It will be interesting! Coinbase fired this guy for breaking Coinbase's internal insider trading rules, but now will they have to come in and help defend him in court against federal insider trading charges just to prove that they don't list securities?
Avoiding the legal definition being fought over here for a second, putting "End of story." and "Period." in your blog post as chief legal officer is fairly unprofessional and a bit astounding when you're going up against a government agency if not entire government that could wipe you off the map.
I suppose hubris and cryptocurrencies go together, but it still struck me.
Huh, would you mind sharing the latest CFO professional handbooks? I definitely wouldn’t wanna overstep the all knowing government agencies by placing emphasizes in the blogpost headlines!
Most Cryptocurrencies do NOT fulfil the definition of a security because there is no underlying "thing". This is why shares (with a company underlying them) are and bonds (with debt and debtors under them) are securities (that and the fact they can be traded) but currencies are NOT. Obviously there are exceptions to that like tokenised stocks. This is also why I would not consider most crypto an investment: there is no source for a reasonable expectation of a return.
In the UK, we just designate certain markets as "regulated" (stocks for instance) and others as not (eg FX). That would avoid this whole nonsense where the SEC etc have to argue that some things ARE securities and others are NOT (if bitcoin is a security then stamps definitely are, do the SEC want to regulate stamps? Or Baseball cards or cars, the examples are pretty endless...).
Watching all of this makes me think regulators either being disingenuous or dumb. I doubt it's the latter. So is this someone just grabbing power for its own sake ("I can get more salary and a better office if we get to regulate crypto)? Or maybe trying to get media coverage to up their personal brand for a political career? Either way, if congress wants the SEC to do this, they should pass such a law, and if they haven't then the SEC should be careful what it sticks it's nose into not least because regulating all of Crypto would be exceedingly difficult and error prone.
They should be considered regulated, because there is some value underlying them (the forex), plus they're traded and offered to unsophisticated investors etc.
A BTC ETF could maybe be the same.
Similarly shares in a farm would be regulated, but farms (or cattle :) ) would not be. Otherwise the SEC ends up regulating all known trade and/or value production...
See the story about insider trading. "Former Coinbase Employee Allegedly Tipped His Brother and Friend Regarding Crypto Assets That Were Going to be Listed on Coinbase Exchanges". Coinbase lawyer is arguing that it's not a security, which if true could mean it's not insider trading. If that's the case, customers are losing protection.
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All crypto should be treated as securities. The rampant insider trading, lack of transparency in project finances and decision making is insane.
I've consulted for a few crypto projects. In most of them, the founders completely misused ICO funds for personal gains and traded their own tokens with inside info.
If your project token is available to be purchased and sold in the US, they should be subject to the same rules other securities follow.
Scamming people shouldn't be this easy.
China got this right by banning cryptocurrencies. It seems like the US is happy to wallow in its own crypto scam waste while other countries are more efficient with how they allocate resources in their economies.
You probably aren't from the US, but we don't have a top down rule of how resources are allocated like other countries. It is a free market, so if someone wants to waste their resources building electric cars or a search engine - they are more than welcome to do so.
> The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
https://www.law.cornell.edu/uscode/text/15/77b
I'm not an expert on security law. All I know is that there needs to be far better regulation around crypto whether it's labeling them as securities or creating brand new regulation. It's just way too easy to scam people in crypto.
Its rampant in discords and telegram chats.
At least acknowledge the difference between ICO funds, NFTs, native tokens, inflationary or deflationary assets, liquidity pools, slush funds with voting and governance attached.
Even getting some nuance on the different ways in which one thinks different crypto assets are a scam would be nice. But here I see no engagement or interest in the particular assets in question or the details of the story. Why?
> It's so tiresome.
Yes, isn't it? Can we regulate this space under the same rules as other finance yet? Or do we need Joe Public to be ripped off for a few more billion first?
* Indexed says that you'll "gain exposure to passively-managed crypto index portfolios represented by a single token" and references their $2.25m assets under management.
* Kromatika says that they'll be selling some reserved KROM tokens on an ongoing basis in order to fund their project.
* DappRadar says that, by buying their RADAR token, you will help scale their "Dapp store".
The second and third are perhaps arguable, although I struggle to believe that anyone would buy their tokens except as an investment in the future of their platforms. The first is the most obvious security imaginable. This kind of thing is why I don't usually engage with the details of specific coins; at least when we're talking about exchange-listed coins, they all end up being like this.
They don't want to distinguish between any of that and instead want to blanket all of them and say that they are all the same. Not all NFTs are JPEGs and there is an obvious difference between a 'coin' vs a 'token' where those blockchains which allow tokens, you will see them have ICO launches since 2016.
> Even getting some nuance on the different ways in which one thinks different crypto assets are a scam would be nice. But here I see no engagement or interest in the particular assets in question or the details of the story. Why?
I think the right approach is to wait for the Ripple vs SEC case which will not only determine whether if XRP (Ripple's blockchain coin) is a security or not, but the wider implications on other coins and tokens. But as for ICOs in general, the SEC has already cracked down on unregistered ICOs in 2018, making them illegal in the US.
Overall I don't think you will get a rational response on this site about anything mentioning crypto. Instead, the typical response you will get on HN is always to the extreme: 'All of crypto is scam', 'Ban it all, ban everything crypto, all of it', 'web3 should die in a fire'.
It is indeed the same absolutist nonsense that doesn't add any new arguments other than spreading regurgitated garbage that is recycled from other anti-crypto supporters and repeated here.
If my exchange was accused of having an employee doing something so damaging as insider trade against my customers, I would deny it if it were false, or apologize and promise corrections/reparations if it were true.
Instead, Coinbase does not deny that their employee damaged their customers, but instead spend their effort in denying the legal technicality that could make them liable.
I've made up my mind, Coinbase leadership are scumbags.
I think the fact that Coinbase does not deny that their employee acted wrongly is a good thing.
Their stance is that cryptocurrencies aren't securities to avoid ("unfair") SEC regulatory capture.
Obviously they don't deny it because it's true, that's not my point. My point is that even being true, their first concern could be their customers, but it's not because they're scumbags.
[1] in case you missed it https://www.justice.gov/usao-sdny/pr/three-charged-first-eve...
And the result of that rests on the Ripple vs SEC case for determining if XRP or any other crypto is a security of not.
I suppose hubris and cryptocurrencies go together, but it still struck me.
In the UK, we just designate certain markets as "regulated" (stocks for instance) and others as not (eg FX). That would avoid this whole nonsense where the SEC etc have to argue that some things ARE securities and others are NOT (if bitcoin is a security then stamps definitely are, do the SEC want to regulate stamps? Or Baseball cards or cars, the examples are pretty endless...).
Watching all of this makes me think regulators either being disingenuous or dumb. I doubt it's the latter. So is this someone just grabbing power for its own sake ("I can get more salary and a better office if we get to regulate crypto)? Or maybe trying to get media coverage to up their personal brand for a political career? Either way, if congress wants the SEC to do this, they should pass such a law, and if they haven't then the SEC should be careful what it sticks it's nose into not least because regulating all of Crypto would be exceedingly difficult and error prone.
A BTC ETF could maybe be the same.
Similarly shares in a farm would be regulated, but farms (or cattle :) ) would not be. Otherwise the SEC ends up regulating all known trade and/or value production...
Say what you want, but I consider these three people fraudsters, even if the law doesn't exactly cover this "angle".
I expected Coinbase to react like this, of course. And I hope the whole scam thing in crypto will eventually be properly regulated.
I'm all for innovation in Fintech; I am not in favor of scamming millions of people just because the laws are not up to speed with it.