Shapeshift to delist coins after SEC securities ruling

[Khaleesi]

Extract from Shapeshift response;

"In light of the SEC’s statements, we will need to adapt our service offering to ensure it’s not mischaracterized as a “securities exchange.” To err on the side of caution, we may need to halt our inscriptions to certain blockchains. This means that we may need to delist some types of tokens from the platform, which is unfortunate for our users who have enjoyed the ability to participate in these experimental and innovative technologies.

We have thus instructed our counsel to examine the tokens available on ShapeShift, especially through the lens of the Howey Test, which is the test the SEC applies to determine the presence of a security.

As that analysis is done, certain tokens may be removed from the service for individuals within the United States, who will then no longer be able to interact with these technologies safely or transparently through the ShapeShift platform. Additionally, we will consider the application of the Howey test to all new tokens we list. "

https://info.shapeshift.io/blog/2017/08/17/shapeshift-and-tokens-securities

[Hodlezerper]

The hammer begins to fall...

[pucksterpete]

and here I thought Erik Voorhees was against those sec laws

[XRPYoungSkyWalker]

36 minutes ago, Khaleesi said:

Extract from Shapeshift response;

"In light of the SEC’s statements, we will need to adapt our service offering to ensure it’s not mischaracterized as a “securities exchange.” To err on the side of caution, we may need to halt our inscriptions to certain blockchains. This means that we may need to delist some types of tokens from the platform, which is unfortunate for our users who have enjoyed the ability to participate in these experimental and innovative technologies.

We have thus instructed our counsel to examine the tokens available on ShapeShift, especially through the lens of the Howey Test, which is the test the SEC applies to determine the presence of a security.

As that analysis is done, certain tokens may be removed from the service for individuals within the United States, who will then no longer be able to interact with these technologies safely or transparently through the ShapeShift platform. Additionally, we will consider the application of the Howey test to all new tokens we list. "

https://info.shapeshift.io/blog/2017/08/17/shapeshift-and-tokens-securities

Jon Snow knows nothing, please someone explain.

[Malloy]

Anyone can speculate on which one will be delisted?

[Graine]

Oh this is lovely. Everything will be Coinbase. And the fees they say to pay. Aka the curious case of expensive internet. 

[CNFlinch]

I remember when shapeshift was just for money launderers. 

 

[JoelKatz]

19 minutes ago, pucksterpete said:

and here I thought Erik Voorhees was against those sec laws

He may or may not be, but you have to follow even the laws you are against. That is, assuming you value your freedom and your ability to sleep at night.

[pucksterpete]

2 minutes ago, JoelKatz said:

He may or may not be, but you have to follow even the laws you are against. That is, assuming you value your freedom and your ability to sleep at night.

I guess then that is why shapeshift will be de-listing some coins

By the way, you sure riled up a stir over on the other thread   

[pucksterpete]

19 minutes ago, Malloy said:

Anyone can speculate on which one will be delisted?

XRP  

[Khaleesi]

28 minutes ago, XRPYoungSkyWalker said:

Jon Snow knows nothing, please someone explain.

Put simply, blockchain tokens are assets on a blockchain protocol. Bitcoin, Ethereum, and Monero are the most popular and widely used blockchain tokens generated on decentralized applications (or, Dapp, pronounced ‘dee-app’), but the area is ripe for development. There are many projects exploring a variety of use cases of decentralized protocols, from the first-generation of digital currencies mentioned above to the creation of decentralized businesses models that build off of an existing blockchain, or even build their own. In this way, Dapps–like investment contracts in the twentieth century–have the potential to entirely transform the economic ecosystem (think of how bitcoin already generates a global marketplace without centralized authority). The bitcoin model–end-to end encryption, open-source, and peer-to-peer–is likely to form the future basis of the Internet, social media, and data storage. But the rise of digital tokens–the vehicle of decentralized ownership–poses complex legal questions regarding it’s jurisdiction and regulation.

Howey posed questions about the nature and definition of a security. Today, blockchain tokens bring similar inquiry: By owning tokens, am I investing in a speculative enterprise? What determines voting rights on the blockchain? What happens if someone steals my Sia coin?

These are all pertinent questions that developers, regulators, and users will be asking. And in every case the Howey test will be applied. But will it govern token ownership?

A recent white-paper (pdf) brings this issue to the fore. Composed by Coinbase in collaboration with Coin Center, Union Square Ventures and Consensys, “A Securities Law Framework for Blockchain Tokens” begins the translation of a twentieth-century court ruling into twenty-first century relevance.

The collaboration’s paper advocates that Dapps be designed with the Howey test in mind. Whether one likes it or not, they posit, Dapps are in the regulatory purview of federal securities law. If Dapp tokens are securities, the SEC has the authority to determine the legality of selling them to US citizens and whether owners of tokens must register with the SEC–an action at odds with nature of Dapps: Unlike Howey’s enterprise, Dapp’s are autonomous, distributed, and decentralized. Therefore, the paper offers an open-source framework to guide best practices of building an blockchain token that isn’t regulated as a security.

The upshot of this framework is that blockchain tokens, if designed properly, should be deemed as a simple contract, equivalent to a franchise agreement.By this measure, the analogy is fitting: holders of blockchain token are granted rights to contribute to a larger system, “rather than through a passive investment interest.” The advantage of classifying Dapp tokens as a simple contract disentangles token ownership from the legal complexities of holding a security. It further encourages the inevitable shift towards decentralization, improving the efficiency and security of digital protocols.

For some, the paper presents a controversial stance. Why should a US government agency shape best-practices? But for the integrity and the sustainability of Dapps, it is a pragmatic way forward.

https://medium.com/bittrust/passing-the-howey-test-how-to-regulate-blockchain-tokens-d218da93a8b6

[Guest]

34 minutes ago, pucksterpete said:

and here I thought Erik Voorhees was against those sec laws

Even those who are against laws, will have to abide them.

[Coinseeker]

1 hour ago, Malloy said:

Anyone can speculate on which one will be delisted?

My guess based on the SEC opinion...just the ones that actually look like securities.  Offer dividends, shares, etc.  Everything else should be fine...they aren't securities.  Knowing Erik V...he'll only delist that which is necessary.  

[Xi195]

1 hour ago, pucksterpete said:

XRP  

Does not pass the Howey Test in my opinion. There is no expectation of profits returned. Instead, money is exchanged for a digital item which provides utility. In essence, XRP is digital stamps.  I don't believe it passes the "common enterprise" test either. Funds used to purchase XRP are not pooled and invested on behalf of contributors. Technically funds are used to finance Ripple which could potentially qualify in the courts.

I can say for certain that cryptos which promise a portion of returns will be used to buy back supply will be considered securities. These would include ICN, QAU, and XRL.

 

Any POS/POW token is likely exempt as supply is distributed in response to a service provided by the miners. This fails the portion of the Howey Test which requires that the profit comes from the effort of the promoter. POW/POS coins which pre-mined an auctioned tokens to U.S. individuals could be in trouble though. Who would've thought that pre-mining was not only philosophically sound according to BTC die-hards, but also a sound practice to avoid the SEC. 

[Jasombre]

46 minutes ago, Xi195 said:

Does not pass the Howey Test in my opinion. There is no expectation of profits returned. Instead, money is exchanged for a digital item which provides utility. In essence, XRP is digital stamps.  I don't believe it passes the "common enterprise" test either. Funds used to purchase XRP are not pooled and invested on behalf of contributors. Technically funds are used to finance Ripple which could potentially qualify in the courts.

I can say for certain that cryptos which promise a portion of returns will be used to buy back supply will be considered securities. These would include ICN, QAU, and XRL.

 

Any POS/POW token is likely exempt as supply is distributed in response to a service provided by the miners. This fails the portion of the Howey Test which requires that the profit comes from the effort of the promoter. POW/POS coins which pre-mined an auctioned tokens to U.S. individuals could be in trouble though. Who would've thought that pre-mining was not only philosophically sound according to BTC die-hards, but also a sound practice to avoid the SEC. 

Uh oh, sounds like my Tezos are in trouble