SEC statement on "true cryptocurrencies"

[n2it]

Just read this article (https://cointelegraph.com/news/sec-hints-at-tighter-regulation-for-icos-smart-policies-for-true-cryptocurrencies) summarizing the SEC's definition of "True cryptocurrencies" and was wondering what effect this would have on Ripple's XRP.

Seems the SEC considers "True cryptocurrencies" as tokens that use blockchain ledgers *and* can be mined (XRP isn't mined). I get the impression that mine-able tokens will get less strict regulation from the SEC, but non-mine-able tokens will be treated as securities, which have a higher bar to clear for public trading. I.E., the value of non-mine-able tokens is based on the company's performance and thus become subject to the regulations used for securities.

My initial impression is that this would be another hoop that XRP has to jump through to be legit, giving mineable tokens an edge over XRP. So XRP prices should go down on this news.

Since I'm a total noob at CCs, I could be completely wrong about this. The market is currently proving the "you're a noob" hypothesis, as XRP prices went up on news that is days old. I do think that if any non-mine-able token can handle the additional regulations, it would be XRP. Other ICOs with non-mine-able tokens would be in serious trouble.

Any experienced CC experts willing to explain this?

[Toroth]

5 minutes ago, n2it said:

Just read this article (https://cointelegraph.com/news/sec-hints-at-tighter-regulation-for-icos-smart-policies-for-true-cryptocurrencies) summarizing the SEC's definition of "True cryptocurrencies" and was wondering what effect this would have on Ripple's XRP.

Seems the SEC considers "True cryptocurrencies" as tokens that use blockchain ledgers *and* can be mined (XRP isn't mined). I get the impression that mine-able tokens will get less strict regulation from the SEC, but non-mine-able tokens will be treated as securities, which have a higher bar to clear for public trading. I.E., the value of non-mine-able tokens is based on the company's performance and thus become subject to the regulations used for securities.

My initial impression is that this would be another hoop that XRP has to jump through to be legit, giving mineable tokens an edge over XRP. So XRP prices should go down on this news.

Since I'm a total noob at CCs, I could be completely wrong about this. The market is currently proving the "you're a noob" hypothesis, as XRP prices went up on news that is days old. I do think that if any non-mine-able token can handle the additional regulations, it would be XRP. Other ICOs with non-mine-able tokens would be in serious trouble.

Any experienced CC experts willing to explain this?

I'm sure XRP will still be seen as a "true crypto" in their eyes. The heavy regulations are aimed at these new coins that keep popping up which have a track record of being complete scams. I can't even begin to imagine how much money has been stolen by these scam coins. Even my co-worker got scammed despite my word of caution and lost thousands.

[Hodlezerper]

14 minutes ago, n2it said:

Just read this article (https://cointelegraph.com/news/sec-hints-at-tighter-regulation-for-icos-smart-policies-for-true-cryptocurrencies) summarizing the SEC's definition of "True cryptocurrencies" and was wondering what effect this would have on Ripple's XRP.

Seems the SEC considers "True cryptocurrencies" as tokens that use blockchain ledgers *and* can be mined (XRP isn't mined). I get the impression that mine-able tokens will get less strict regulation from the SEC, but non-mine-able tokens will be treated as securities, which have a higher bar to clear for public trading. I.E., the value of non-mine-able tokens is based on the company's performance and thus become subject to the regulations used for securities.

My initial impression is that this would be another hoop that XRP has to jump through to be legit, giving mineable tokens an edge over XRP. So XRP prices should go down on this news.

Since I'm a total noob at CCs, I could be completely wrong about this. The market is currently proving the "you're a noob" hypothesis, as XRP prices went up on news that is days old. I do think that if any non-mine-able token can handle the additional regulations, it would be XRP. Other ICOs with non-mine-able tokens would be in serious trouble.

Any experienced CC experts willing to explain this?

It's also entirely plausible that the SEC never defines XRP as a crypto-currency, and re-defines it as an structural digital asset, similar to telecom or our utility companies. Who really knows? 

There is a LOT of work to do before we know how the SEC and governments worldwide will start to categorize and regulate crypto. 

[Coinseeker]

Even if the SEC were to determine XRP a security, it would be "fairly easy" to get into compliance given Ripple's resources and relationships.  Maybe they pay another fine if the SEC wants to be ***** but I suspect all will be fine.

[deadestfish]

Quote

 if a crypto-asset issued by a company increases in value over time depending on the performance of the company, it is considered a security

This does rather sound as though it could be applied to non-minable coins like XRP and XLM. The comments about 'semantic gymnastics' seem to signal a tendency to err on the side of stricter regulations.

Quote

Clayton referred to true cryptocurrencies as public Blockchain networks with native cryptocurrencies either mined or produced by the public.

I'm not sure what 'produced by the public' would actually mean perhaps it's intended to cover proof of stake, but it's not a well defined definition.

Personally I'd tend to think XRP would meet the definition of a security, if the regulations are as expressed in these comments (and these are still just comments). That would likely mean the price might take a hit and go down some in the short term. It may also impact how XRP can be bought and sold. This will be interesting to watch.

[xrp_moonjet]

32 minutes ago, n2it said:

Just read this article (https://cointelegraph.com/news/sec-hints-at-tighter-regulation-for-icos-smart-policies-for-true-cryptocurrencies) summarizing the SEC's definition of "True cryptocurrencies" and was wondering what effect this would have on Ripple's XRP.

Seems the SEC considers "True cryptocurrencies" as tokens that use blockchain ledgers *and* can be mined (XRP isn't mined). I get the impression that mine-able tokens will get less strict regulation from the SEC, but non-mine-able tokens will be treated as securities, which have a higher bar to clear for public trading. I.E., the value of non-mine-able tokens is based on the company's performance and thus become subject to the regulations used for securities.

My initial impression is that this would be another hoop that XRP has to jump through to be legit, giving mineable tokens an edge over XRP. So XRP prices should go down on this news.

Since I'm a total noob at CCs, I could be completely wrong about this. The market is currently proving the "you're a noob" hypothesis, as XRP prices went up on news that is days old. I do think that if any non-mine-able token can handle the additional regulations, it would be XRP. Other ICOs with non-mine-able tokens would be in serious trouble.

Any experienced CC experts willing to explain this?

@JoelKatz Kindly share your thoughts.

[xrp_moonjet]

But I think this point will save XRP

 "If a certain company has control over the monetary supply of its crypto-asset distributed to its users and the value of the token is based on the performance of the company,"

XRP wasn't created by Ripple.. It was donated to Ripple Labs. 

I guess Ripple knows that its coming , thats why they released this FAQ ahead of time https://ripple.com/insights/top-9-frequently-asked-questions-ripple-xrp/

"Ripple the company didn’t create XRP; 100 billion XRP was created before the company was formed, and after Ripple was founded, the creators of XRP gifted a substantial amount of XRP to the company."

[corak]

Mining is somewhat of a red herring. Here's the crucial point: Ripple does not claim, nor has it ever claimed, that XRP entitles the bearer to some future dividend, interest, legal ownership of a project or a company, or anything else that might make it a form of security. They consider it (and rightly so) a digital asset. 

 

To clarify, the head of the SEC explained this: they will not stick to the letter of the law or some one liner directive in deciding who to go after. Just apply common sense, if it's functionally the same as a security, then SEC will enforce, even if it has "coin" or "token" in the name.

XRP simply isn't, so there is nothing to worry about.

Edited February 10, 2018 by corak

[Trickery]

11 minutes ago, xrp_moonjet said:

But I think this point will save XRP

 "If a certain company has control over the monetary supply of its crypto-asset distributed to its users and the value of the token is based on the performance of the company,"

XRP wasn't created by Ripple.. It was donated to Ripple Labs. 

I guess Ripple knows that its coming , thats why they released this FAQ ahead of time https://ripple.com/insights/top-9-frequently-asked-questions-ripple-xrp/

"Ripple the company didn’t create XRP; 100 billion XRP was created before the company was formed, and after Ripple was founded, the creators of XRP gifted a substantial amount of XRP to the company."

It is also a public ledger.

[xrp_moonjet]

2 minutes ago, Trickery said:

It is also a public ledger.

So to Defend FUD's that are going to come in:
- Public Ledger 

- Ripple didn't create XRP and XRP was donated to Ripple

 

[corak]

1 minute ago, Trickery said:

It is also a public ledger.

Well, technically, all of the "will pay dividends in ETH" security-coins also have a public ledger, it doesn't change the fact that they're, for all intended purposes, securities

[corak]

Just now, xrp_moonjet said:

So to Defend FUD's that are going to come in:
- Public Ledger 

- Ripple didn't create XRP and XRP was donated to Ripple

No. Simply that XRP does not represent ownership or right to some other thing external to it, as such it is not a security

[Trickery]

2 minutes ago, corak said:

Well, technically, all of the "will pay dividends in ETH" security-coins also have a public ledger, it doesn't change the fact that they're, for all intended purposes, securities

I think the difference may lie in this statement, "Blockchain networks with native cryptocurrencies either mined or produced by the public." So were he who shall not be named and CL et al considered public or a company? and the same could be asked of Ethereum.

[corak]

3 minutes ago, Trickery said:

I think the difference may lie in this statement, "Blockchain networks with native cryptocurrencies either mined or produced by the public." So were he who shall not be named and CL et al considered public or a company? and the same could be asked of Ethereum.

What about RaiBlocks/Nano then? ADA? IOTA?

Making the "mining" a criteria for whether these assets are securities or not strikes me as a lack of understanding (Just goes to show you the Bitcoin geniuses have been misinforming more than just some kids on Twitter). The intention is clear enough though. If the asset functions as a security, it won't matter that it's technically implemented over a distributed ledger. If it doesn't, there is nothing to worry about.

Edited February 10, 2018 by corak

[Trickery]

Just now, corak said:

Making the "mining" a criteria for whether these assets are securities or not strikes me as a lack of understanding (Just goes to show you the Bitcoin geniuses have been misinforming more than just some kids on Twitter). The intention is clear enough though. If the asset functions as a security, it won't matter that it's technically implemented over a distributed ledger.

Yeah it is kinda strange to make the argument about semantics when using criteria that is full of semantics.