Topic: So, stock exchange is not allowed in usa using bitcoins? - page 4. (Read 11624 times)

IMHO going forward it looks like there are three avenues one could peruse as a GLBSE replacement.

1) The SilkRoad model.  
Accept it is a violation of law and take steps to ensure regulation and prohibition is difficult or impossible.  The largest issue with this model is trust.  Fees likely will be higher so trusting the operator is less risky although some type of Open Transaction type of system is likely advisable.  The issue becomes trusting issuers.  While GPG can be use many existing players have real world identities tied to their GPG identity.  To gain any protection from this type of model requires asset issuers to "start over".  

2) Offshore it.  
Find a location in a "financial privacy" location which has less restrictive securities laws.  It may not be possible to offer true equity but "revenue sharing contracts" potentially could be traded.  If indirect revenue sharing of US based entities was desired those entities could sell equity to an offshore corporation or trust which tend issues "shares" in a revenue sharing contract.   There is significantly higher startup and research costs involved.  Taxation for US based assets is non-optimal (US based companies would be required to withhold 30% taxes on any revenue paid to foreign owners).   With the proper licensing just about anything is possible offshore.  For example one could operate a bitcoin mutual fund or even hedge fund, open a Bitcoin funded Forex brokerage, etc.  The large risk is not knowing if you are "firewalled" enough from other nation states.  Sure if you are a citizen of the Cook Islands, your servers are on the Cook Islands, your bank accounts, offices, and other assets are on the Cook Islands and you comply with all laws in the Cook Islands you and your enterprise is likely "safe" even if the SEC disproves then again most people won't have that option.  Their "firewall" may have some holes in it.

3) Work for within the system.  
Get a broker dealer license, be regulated by SEC.  Comply with all regulation including KYC and AML.  Essentially the MtGox model except for securities.  A broker dealer can trade any security even "unlisted" securities (meaning not filed with SEC).   This is the so called pink sheets.   In theory a broker could accept Bitcoins (potentially only accepting Bitcoins) and allow trade in Bitcoin denominated securities for its private clients.   This option would require some significant legal research and has the highest cost.  It probably isn't viable at this point but if Bitcoin continues to grow it likely is inevitable.

 I am not a lawyer and not advocating any course of action.   Always seek legal counsel before starting, joining, or investing in any project where its legality is not settled law.

It is perfectly fine to run a stock exchange using btc in the US, but only if you comply with all the other laws and regulations concerning reporting and permits and liscensing.

If it meets the legal definition. Lawyers have told me that if it represents an interest in something else and is easily traded, it would generally be considered a security.


The law is both clear and broad. Courts have interpreted the law to cover pretty much anything that represents ownership of a right that can be traded.


Courts have interpreted this list as showing the intent to cover as broad a scope as possible and absolutely will not limit the definition to just the listed examples.

The law is not what you think it should be.

This is a counterproductive and self-destructive strategy. Look at the Internet -- the technology that has made it almost impossible for even the world's most repressive governments to stop their citizens from reading Western media and blogging about their government's abuses. It wasn't built by people who ignored the regulatory framework. It was built by people who found ways to work within it, worked to hold regulation at bay, and even change it where necessary.

Right. And how do you know what I'm issuing is a security? Your wish to classify some bitcoin assets as securities is simply not enough. You have to point out exactly where the existing law applies to bitcoin assets? Stored value?!... What is that? I'm having really hard time trying to figure out just one value that is NOT stored.

Every bitcoin transaction is a private digital message where any third party has no place. This is a private message between 2 people. If this transaction does not include any government property (like fiat money) and does not use any government infrastructure then the government has no place there. Privacy is privacy is privacy. You either have privacy or you don't. Simple as that.

If privacy is outlawed, only outlaws will have privacy. - Phil Zimmermann on PGP
If zeros and ones are outlawed, only outlaws will use zeros and ones. - Jon  Matonis

In the current form applying the existing regulatory framework to bitcoin is counter productive. This only generates more outlaws. There is no point for the bitcoin community to spend time and money for lawyers. The legal guardians of the status quo do not care about the laws, because all monetary and financial laws are coined with one goal - to preserve the status quo at any rate.

If you issue securities about them, yes.

We are "paper-people" trading with "paper-money" governed by "paper-laws" in a "paper-world".
Bitcoin comes and lights the match!

The regulation comes from issuing and trading securities. It has nothing to do with what the securities are exchanged *for*.

Did I say bitcoin has no value? Where? Of course, they have value. So does everything that is surrounding us has value for somebody. Does that mean security laws apply for everything that is surrounding us?

So does my email signed with my private key has value. But... not for the judge! As the judge doesn't have the public key to unlock it! End of story.

becoin, the only question you have to ask is "What would a judge think?". The law is not a program. It is not an algorithm you can find security holes in to hack your way through it.

A judge would clearly believe Bitcoins have value, as would any reasonable man after seeing MtGox, so securities laws would apply if you issued shares denominated in BTC. End of story. Even if you strongly disagree with this please don't go on posting because there is really no ambiguity here - your interpretation of the law is wrong and the other posters are correct.


Yes, this is a problem not just from a legal perspective but also because it's insecure. Over time I'm hoping some of the services such companies provide migrate to P2P networks so the security and legal issues go away. Of course eliminating the centralized marketplace/exchange doesn't mean the participants suddenly become unregulated.

The only solution for that is to put pressure on politicians and regulators to reform the laws so they scale down appropriately. It's easier if you can show a thriving marketplace that's clearly A Good Thing(tm) but is in a legal grey area.

Yeah, this is a solid argument. Good luck SEC regulating every server in every jurisdiction on this planet that transfers messages signed with private keys!

Nor does it mention gold, electrical power or corn. It doesnt even mention Euros or dollars, or anything really. Therefore, securities dont exist?


You are an idiot; that case is definitely closed.

Do gpg emails have value ?

The law itself doesn't even mention bitcoin. Bitcoin assets do not appear in the definition of a security. Case closed.

Look around you and tell me at least one thing that has no value? Why is bitcoin value so special to you?

Sigh.
The law itself doesnt even mention money. It doesnt appear anywhere in the definition of a security (spare me the comment on the foreign currency exchange which is explicitly mentioned).
As for selling securities, it doesnt mention money in that definition either, It mentions trading the security for VALUE. I even bolded it for you.
Is your point that bitcoins have no value?

Investors on a bitcoin stock exchange DO NOT MAKE MONEY! They make bitcoins. Bitcoin is not money! ONLY if they sell their bitcoin assets against dollars will they make money.

Thats my point exactly. The same goes for GLBSE.


I posted that a million times already:

 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 de-
posit 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 secu-
rities (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 cur-
rency, or, in general, any interest or instrument commonly
known as a ‘‘security’’, or any certificate of interest or partici-
pation in, temporary or interim certificate for, receipt for, guar-
antee of, or warrant or right to subscribe to or purchase, any
of the foregoing.


The term ‘‘sale’’ or ‘‘sell’’ shall include every contract of
sale or disposition of a security or interest in a security, for
value. The term ‘‘offer to sell’’, ‘‘offer for sale’’, or ‘‘offer’’ shall
include every attempt or offer to dispose of, or solicitation of
an offer to buy, a security or interest in a security, for value.

www.sec.gov/about/laws/sa33.pdf

As for legal interpretation:

The definition for each of these securities is either listed in the Act under A.R.S. Section 44-1801 or provided by judicial interpretations and tests.[8] In determining whether a certain instrument is a security, a court will consider the substance rather than the form of the instrument.[9] “Essentially, if the purchaser will be a passive owner―relying on someone else’s efforts or conduct in order to make money on the investment―the instrument is probably a security.”[10]
http://www.mitchell-attorneys.com/legal-articles/securities-registration-and-exemption/

Puppet, silk road must apply regulation because they sell drugs, not because they sell what they sell against bitcoins! Bitcoin is just a tool! You can regulate the usage of a tool, not the tool itself! Knifes are dangerous because they are very useful to criminals if they kill people. Does that mean we should apply extra regulation to all knife manufacturers? The bureaucrat's dream - Regulation after regulation after regulation after regulation after regulation...

Transactions on GLBSE DO involve bitcoins! Would you care to explain why every asset priced in bitcoins is a security?

Becoin, you should start another silk road, perhaps one that doesnt require tor. Since payments will be processed with bitcoin and not "money", you wouldnt be selling anything and surely regulations wont apply, right?

For the nth time, bitcoin has nothing to do with it.  Swapping assets on GLBSE,  a transaction that doesnt even involve bitcoins (let alone fiat) would be subject to regulation, because the assets are securities, and therefore subject to regulation.

I'm afraid, all boils down to that at the end of the day. All goes as I've predicted 1 year ago. First they will try to put you in the existing legal framework and label all your tools and activities under already well established labels. Then they will try to create new laws and regulations. Don't allow them to label you under existing labels that are grossly misleading. Let them create new regulations if they can!