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A Former Top Wall Street Regulator Turns to the Blockchain


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21 minutes ago, Plennie_Wingo said:

Perhaps this is what Coinbase is waiting for?  Would this have any effect on the oveseas exchanges?

I'll forgive you for saying the 'C' word lol :girl_haha:....I can't see why it would have any effect on the exchanges outside of the US but please anyone more knowledgeable than me step in to correct this. 

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20 minutes ago, Mrsrippley said:

I'll forgive you for saying the 'C' word lol :girl_haha:....I can't see why it would have any effect on the exchanges outside of the US but please anyone more knowledgeable than me step in to correct this. 

I also sense the skulking presence of the Winklevoss twins.  The fun never ends with those two. 

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5 hours ago, xrphilosophy said:

Thanks for the post.  If XRP were to be classified as a security I believe what this means is that it would not be allowed on UNregulated exchanges.  All regulated exchanges will buy and sell securitized tokens.  It means a shift in the "legitimacy" of the XRP token from a regulatory standpoint to almost 'more legitimate'.  This is my understanding.  I don't see that harming XRP in the least.  Any thoughts on this?  

From the same article and this is pretty concerning:

"If they are deemed to be securities, it could become illegal for Americans to trade them on most of the exchanges where they are now traded. That would make it harder to buy and sell them and depress their prices".

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21 minutes ago, Still1 said:

From the same article and this is pretty concerning:

"If they are deemed to be securities, it could become illegal for Americans to trade them on most of the exchanges where they are now traded. That would make it harder to buy and sell them and depress their prices".

Well again, the way he frames it is disingenious and full of hype.  Another way of putting it is:  "XRP would be tradeable on regulated exchanges only.  Unregulated exchanges would not allow it.  Yet if the SEC were to crack down hard on XRP they would ALSO crack down on all unregulated exchanges, rendering them practically impotent, so the end result wouldn't have substantive impact." 

But he doesn't say that.  No detail.  No full story.  Just cherry pick what he wants as if it''s some OP-Ed.  And he is far from being the intellect required for an OP-Ed.  A low paid stringer in San Francisco who hopes his Bitcoin price will rise if all others "fail".  Hardly a supporter of the crypto market in truth, and not one to be "reporting" on the state of affairs in this space. It's unfortunate he has any voice in this space, and hopefully the editors at the Times will soon realize they will need to have a true expert in there.

 

 

Edited by xrphilosophy
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https://www.sec.gov/news/testimony/testimony-virtual-currencies-oversight-role-us-securities-and-exchange-commission

https://www.sec.gov/litigation/investreport/34-81207.pdf

With a Reasonable Expectation of Profits

"Investors who purchased DAO Tokens were investing in a common enterprise and reasonably expected to earn profits through that enterprise when they sent ETH to The DAO’s Ethereum Blockchain address in exchange for DAO Tokens. “ [P]rofits” include “dividends, other periodic payments, or the increased value of the investment.” Edwards , 540 U.S. at 394. As described above, the various promotional materials disseminated by Slock.it and its co-founders informed investors that The DAO was a for-profit entity whose objective was to fund 12 projects in exchange for a return on investment. The ETH was pooled and available to The DAO to fund projects. The projects (or “contracts”) would be proposed by Contractors. If the proposed contracts were whitelisted by Curators, DAO Token holders could vote on whether The DAO should fund the proposed contracts. Depending on the terms of each particular contract, DAO Token holders stood to share in potential profits from the contracts. Thus, a reasonable investor would have been motivated, at least in part, by the prospect of profits on their investment of ETH in The DAO."

I don't know of any statement by Ripple suggesting/promising returns on XRP purchases. Also, the initial distribution of the coin is very different, quite a large chunk is given to creators then put to a charity, about 200 million have been distributed away for free etc.

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One member on twitter puts it well:

"XRP and Ripple are intertwined in the way that an apple orchard that sells its apples are intertwined. I buy an apple and I buy a piece of the orchard. Ripple is a commodity. Mr. Gensler's best argument is one of apples and oranges."

 

Let Nate Popper know how you respond to his rigorous analysis:  

https://twitter.com/nathanielpopper

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It all comes down to whether XRP buyers should be able to reasonably claim that they were promised/suggested a profit/return for purchasing XRP tokens.

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2 minutes ago, ed1 said:

It all comes down to whether XRP buyers should be able to reasonably claim that they were promised/suggested a profit/return for purchasing XRP tokens.

Yes. The whole point of XRP is that it combines the ‘assetness’ of a physical commodity with the the over-the-'phone-wires mobility of bank money. Bitcoin was the first entity to achieve this combination, but it applies equally to XRP. In recent years, it's been inordinately profitable to speculate on the prices of digital assets, but that's just an incidental side-effect of them being new — it's not an intrinsic attribute. Anyone who fails to understand this has some reading to do!

The essential reading materials are:—

  1. Satosho Nakamoto's whitepaper for the original intellectual leap (that made electronically mobile assets into a credible proposition for the first time in history).
  2. Subsequent scholarly works from JoelKatz et al. explaining what they've done with Nakamoto's intellectual leap.

Part of the problem is the misuse of the word “investment” to describe the holding of XRP (even the illustrious @Hodor sometime errs thus). Any good dictionary defines investment as being the employment of capital to generate income from the provision of goods or services to the wider economy, and that's not what most XRP holders are doing. The profits from buy-low-sell-high are capital gains, not income, which is why they're taxed differently. It's true that by transacting in XRP, you're committing capital to the development of the nascent XRP economy, but it would be excessive to call your entire holding an “investment”. There's nothing wrong with being a speculator!

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55 minutes ago, ed1 said:

It all comes down to whether XRP buyers should be able to reasonably claim that they were promised/suggested a profit/return for purchasing XRP tokens.

Well, there has been more chatter recently by Ripple execs about supporting the success of XRP.

It comes down to if the banks want to kill crypto, the US government will make that happen.  Democracy in the US is the great nonsense

word - it only matter what the rich want now.

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5 hours ago, flanman said:

 

 

Many securities give you certain rights. It could be an equity share, a right to interest, a right to dividends, a right to voting, etc. depending on the type of security. Holding a token gives you nothing other than speculative return and/or platform utility. If the SEC were to determine that XRP is a security it would not automatically add those extra rights because they were never there to begin with.

All David is saying is that imagine how unworkable the XRPL would be if XRP was structured such that it gave you voting rights etc over what could happen on the XRPL.

Edited by OzAlphaWolf
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Well, if you look at the decision of SEC that qualified the DAO token as a security (https://www.sec.gov/litigation/investreport/34-81207.pdf), you can see that they have implemented a version of the Howey Test (https://supreme.justia.com/cases/federal/us/328/293/case.html).

Howey test essentially asks 4 questions (https://consumer.findlaw.com/securities-law/what-is-the-howey-test.html) :

Under the Howey Test, a transaction is an investment contract if:

1- It is an investment of money

2- There is an expectation of profits from the investment

3- The investment of money is in a common enterprise

4- Any profit comes from the efforts of a promoter or third party

There's no condition about voting rights. If you have the time, do take a look at the DAO decision file. The only part where they talk about partipication by investors is regarding the 4th condition of Howey test, that is to say can the people who invested money (and investments are very very broadly defined through several earlier decisions in courts, it doesn't have to be strictly money, could be coins- as in the case of DAO/ETH coins - could be anything of value really), control voting rights regarding which projects get funded.

The point is there's no strict link to having voting rights as a pre-condition for being accepted as securities. In fact, Howey case discusses land sales contracts by a company in Florida, that is how broad the securities definition can go.  

If we take the DAO decision and the questions and apply it to the case of XRP:

Do the investors in XRP invest money?

Yes, they do. I don't think there's too much to discuss here, except maybe for the very early days when coins were given away to charity.

With a reasonable expectation of profits?

This is a strict no in my opinion. The investors, people like many of us here were never promised any profits. We may, based on our own beliefs/ideas/expectations hope for profits but no one from Ripple or the creators of XRP asset promised/hinted at or suggested that we would have profits by investing money in XRP. We are free to buy XRP as a token whether if it is to simply transfer value from one location to the next or to store value or any other reason we may have, but profits were never promised nor hinted at by any party associated with coin's creators. 

        --- > Derived from the Managerial Efforts of Others (Any profit comes from the efforts of a promoter or third party)

Well again, since the answer to previous question is no, I believe this is not relevant really. But if one were to give the previous question a yes answer, then the question becomes whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise? Well one can argue that 'investors' such as Arrington or all of us in the XRP community have a more significant impact on the success of XRP ecosystem perhaps even more important than Ripple. But, I don't think this is even relevant given that Ripple or the coin's creators do not necesarily promise returns.

Is the investment of money in a common enterprise?

In DAO case, the token community is seen as a common enterprise so I guess this would apply to all cryptos.

 

Main deviations, again IMO are:

1) XRP's origin goes back to creators (Jed etc.) who distributed 20% to their accounts and the rest to Ripple Labs, this was not structured as an ICO. Moreover, 200M XRPs were given away in earlier days, again hard to make a case for a security if it is being given away for free given the profit assumption (this is my guess). 

2) Ripple never made a promise or suggested a profit on XRP holdings.

3) XRP holders can and do innovate to add value to XRP that is outside Ripple Labs' control and to a great extent this is an important part of the value that is generated.

 

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