Topic: What if Cryptos are Classified as Securities (Read 137 times)

I think this is a very realistic scenario. ICO projects are not waiting for the best time. I think there will be an opportunity to get the security status of a token. Those who do not want to do this will have big problems.

Well I think the SEC already said that it's ICOs that are securities and not cryptocurrencies. So I suspect most countries will follow that lead. It doesn't really make much sense to classify a decentralized cryptocurrency as a security. Where as it's often fairly obvious that ICOs tread directly on that ground.

If Cryptos are classified into securities then I think it's acceptance will be increased largely. People will be able to restore their faith into it and invest here. The regulations that will be put into it may not be always in favor of crypto but hopefully it will not go much against it. Beside I think accepting it by putting regulation is much better than banning. 

"Crypto" is not an unique asset class, it covers several asset classes.

There are basically two types of "cryptocurrencies" or "crypto tokens" which are completely different things:

1) decentralized blockchain projects, where a currency is distributed according to deterministic rules written down in the software, allowing everybody to enter it (example: Bitcoin).
2) centrally managed tokens, where a currency is distributed by a central entity (ERC20 tokens, NXT/Waves assets ...).

Only the second case are considered "securities" in most jurisdictions, because in these cases the initiators (managers) promise a "return" (either directly or indirectly), which is tied to the actions of this management, and themselves are benefitting from it.

Decentralized blockchain projects should not have to fear to be classified as securities, because there is no central management. There may be shills promising you high returns, but these are mere users, in most cases they are not managing development nor are the biggest holders. And if the developers chose to change the rules to their benefit, the users may not follow them, and the devs have no way to enforce the change.

There are some mixed forms of classes 1 and 2, notably "premined cryptocurrencies" like Ethereum. They could be considered securities in some jurisdictions, and I have no problem with that because a great part of the "value proposition" is managed by a central entity which also holds considerable parts of the currency supply.

A lot of debate has been going on in various countries about classifying crypto tokens as securities and bringing them under regulations that are at par with instruments that are classified as securities. And now with more money from the institutions seems to be seeping into crypto markets, the debates in the regulatory corridors around the world become rifer.

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