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Bitcoin is the only coin the SEC Chair will call a commodity

• jeffbee 4y ago
  This interpretation seems to require a willful misrepresentation of what the man said. He said it is a speculative asset, is has the basic properties of a security, and people other than himself have labeled it a commodity.
  • Geee 4y ago
    No. He was talking about other cryptoassets being securities, and named only bitcoin as a commodity.
• vmoore 4y ago
  Finance newbie here, but what is a 'security'? I looked it up, but can't grok it despite people's best attempt to describe it. All the articles can't sum it up in an ELI5 way. What's the TL;DR way of describing a security, and how does BTC fare in this? Is BTC a security?
  • ianferrel 4y ago
    Under US law (Howey test) a security is something that 1. You invest money in 2. Along with others 3. With the expectation of profit 4. Derived from the efforts of others ETA: (the others in #2 need not be the same others in #4)
    • deleted 4y ago
      [deleted]
    • ForHackernews 4y ago
      Under this definition, surely all cryptocurrencies fail test #4. Everyone is going to get rich and nobody is going to have to put in any effort, just HODL. WAGMI! To the moon!
      • unicornmama 4y ago
        There are some projects run by corporations who create and sell tokens, and whose founders have made claims promising returns derived from ongoing operations and investments.
      • ianferrel 4y ago
        Most cryptocurrency promotors claim that they have this brilliant team and a great roadmap and in the future all the activity they're going to promote is what will make the token worth something, etc. Which is actually what does make them a security. The claim in the article is that Bitcoin is mostly not like that. There's a protocol and a bunch of users, but there's no one who's leading the enterprise and causing the value to do something. Not sure I buy that claim, but it's not totally crazy.
  • Shank 4y ago
    > Is BTC a security? Probably not in the traditional sense. The difference Bitcoin has to most cryptocurrencies is that it was specifically designed with no "premined" blocks and no preordained rewards. In contrast, a lot of projects sold tokens through an "ICO" with a promise of a future project developed against it. ICOs are basically securities, because you're buying the token without actually any guarantee that the project delivers on what it needs to deliver on for the value to change. In contrast, again, Bitcoin was just offered as a cryptocurrency, from the start. The first block encoded a current event to distinguish the fact that there aren't any rewards already allocated to creators. It was also launched with the complete product available from the start (sans network upgrades). Note: I'm not saying that Bitcoin is good or anything. I'm just distinguishing between it and most other tokens. Bitcoin has governance systems in place and other systems that make it "more security like" but clearly the SEC chair doesn't seem to believe it crosses that line.
  • seoaeu 4y ago
    The other replies give the technical definitions, but the high level picture is that a security is an investment opportunity. The issuer of a security has to follow a bunch of laws to ensure that said issuers don’t go around scamming everyday people
• gjsman-1000 4y ago
  The SEC can threaten, but they may have blown up their opportunity to regulate cryptocurrency. If they lose the Ripple vs SEC lawsuit (and, according to observers, it's not been going as well for the SEC as they would wish), they could permanently lose almost all ability to regulate cryptocurrency by their lack of timely action and because of one speech by an SEC official four years ago. The SEC is basically trying to argue that the speech was personal opinion (and the speech said that ETH was not a security), but Ripple alleges that the speech, though perhaps not an official statement, was much more than a personal opinion. We now know the SEC lawyers were involved in writing the speech, which is making life difficult for the SEC. This is also why the SEC is being far more careful now and is saying only BTC is not a security, but that ship may have sailed. It's being called the Crypto Trial of the Century. A win for Ripple on the SEC's slip-up could mean the SEC is powerless to intervene in most crypto markets. A win for the SEC would result in mass regulation.
  • encoderer 4y ago
    Forgive me for being ignorant but can’t the congress expand SEC powers at any time by changing the law?
    • gjsman-1000 4y ago
      Yes, they can. But no, Congress has not because Congress can't come to agreement over cryptocurrency.
    • lokar 4y ago
      They are allowed to, but unable to. Unable to do nearly anything.
    • xhkkffbf 4y ago
      The saying in Washington is that no one is safe when Congress is in session. And that's pretty much true. Aside from some constitutionally guaranteed activities like petitioning for redress of grievances, they can pretty much legislate anything they can agree upon. (Assuming they can ever agree on anything.) For instance, the duly elected Democrats who control the House, Senate and White House like to point the finger at the Supreme Court, but they could easily pass whatever law they want about abortion. There would be no more arguing about original intent or penumbrae etc.
• smabie 4y ago
  Feels like if BTC is a commodity, then BCH and LTC clearly are as well, no?
  • tesrx 4y ago
    Correct. At a minimum, those are not a security. Gensler has commented on those specifically in the past [1]. [1] https://twitter.com/litecoin/status/1435991743720165378 https://twitter.com/litecoin/status/1435991743720165378
  • lawn 4y ago
    Yes, and there are plenty of other examples too.
  • kayamon 4y ago
    A commodity must be fungible -- i.e. that would imply BTC and BCH/LTC were economically interchangeable. They aren't. Bitcoin's blockchain has a longer proof-of-work than BCH. Honest nodes will only mine the longest blockchain (per Satoshi). Therefore any blockchain shorter than Bitcoin's will ultimately collapse in the long term, making them unsuitable to be considered commodities.
    • etaioinshrdlu 4y ago
      Can you try again using less hand-wavey logic? Every point you make doesn't seem to make much sense.
      • kayamon 4y ago
        If you don't believe it or don't get it, I don't have the time to try to convince you, sorry. Perhaps try some online learning resources: https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/ https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall...
    • AlexandrB 4y ago
      Being fungible means every BTC is the same other BTC and every BCH is the same as every other BCH, not that BCH is the same as BTC. Water and oil are both fungible commodities. No one would claim they're economically interchangeable with each other.
• TimPC 4y ago
  This is huge. Essentially if they find anyone sold crypto to unaccredited investors they would be engaging in illegal sales of a security. This may lead to lawsuits where crypto sellers find they are on the hook for the losses of people they illegally sold to. It may also lead to jail time for a substantial portion of the crypto community.
  • IAmGraydon 4y ago
    >It may also lead to jail time for a substantial portion of the crypto community. I'm cracking up over here. Are you actually being serious?
    • f38zf5vdt 4y ago
      They'll be kept company there by all the people who caused the 2008 US housing crisis.
    • mirntyfirty 4y ago
      I’d claim that tax misrepresentation would likely lead to some jail time, particularly for those that don’t have the funds for legal representation. As far as I can tell, the prevailing point of Bitcoin is to make capital gains.
      • DennisP 4y ago
        If crypto is a commodity, people still owe the same capital gains tax. The IRS has been giving tax guidance on crypto for years; any US person in crypto with half a brain has been following it.
        • mirntyfirty 4y ago
          Agreed. I was providing an example whereby a person could end up in jail from participating in crypto.
    • mjburgess 4y ago
• smohnot 4y ago
  He said BTC was the only cryptocurrency he was comfortable saying was a commodity, while many were securities it didn't address explicitly what all others were “That’s the only one I’m going to say because I’m not going to talk about any one of these tokens” https://twitter.com/SBF_FTX/status/1541565079992369155?s=20&t=CvDEh4HgUtfKZIgX9fM6PA https://twitter.com/SBF_FTX/status/1541565079992369155?s=20&...
  • null0pointer 4y ago
    Thanks, headline is a bit misleading,
  • omginternets 4y ago
    What’s the difference between a security and a commodity? And what does this distinction change for the SEC?
    • phabricator 4y ago
      The Howey Test
    • sshine 4y ago
      > What’s the difference between a security and a commodity? Securities: Stocks and Bonds Commodities: Metals, Grains, and Oil A commodity's defining feature is its interchangeability. One unit is essentially the same as another unit. To an orange juice company oranges are oranges, to an apple juice company apples are apples, and to an oil refinery one barrel of oil is a lot like any other barrel of oil. Commodities must meet certain minimum quality standards and markets do distinguish between different types of the same commodity. But for the most part it's about quantity. https://www.findlaw.com/consumer/securities-law/securities-vs-commodities.html https://www.findlaw.com/consumer/securities-law/securities-v... A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. https://www.investopedia.com/terms/c/commodity.asp https://www.investopedia.com/terms/c/commodity.asp > And what does this distinction change for the SEC? Good question. This thread is full of suggestions. I couldn’t find a truly compelling one except that Bitcoin could fit the description of a commodity.
• wolframhempel 4y ago
  The SEC and Wallstreet have been locked in an eternal cat and mouse game for decades. And given that Wallstreet has the money and hence the talent and options it tends to be a step ahead of the SEC. I expect this will be even more true for crypto. While I believe that some regulation might be a good thing as it makes crypto safer for the wider public I am genuinely doubtful that the SEC has the capabilities or the right incentives to be that regulator.
  • undersuit 4y ago
    It's the same problem that the ATF has with regulating guns or the FDA with regulating drugs; classifications are inherently limited and once you define one I can now make something that doesn't fit your existing classifications. Which is good, we don't want to give the government over-reaching powers, but we also want them to do something.
  • ASlave2Gravity 4y ago
    I think it boils down to public adoption, right? Like, everyone, even the bell-hop, was telling me to buy. It was beyound insane. But they said that because they all saw the graphs. It made the news, etc. But I rarely meet people who will happily take BTC or what have you. Now, is this because it's still in geeksville, or because it's harder to pay taxes, or because its slow? Where do you draw the line on usability? We know why it was made.
  • kloch 4y ago
    In this case the tension is not between SEC and Wall Street but between the SEC (which regulates stocks and bonds) and the CFTC (which regulates commodities and derivatives). Most people in Wall Street and the crypto community want clearer regulations so they know what the rules are for specific coins/tokens and transactions. What we have now is a very slow Government trying to catch up with technology coupled with infighting between different regulators defending their own turf. Fortunately there was a bill introduced in the US Senate (referenced in the article) that would clear up much of this, along with various taxation issues.
• uncomputation 4y ago
  Bitcoin has less foundation- or team-based leadership that have plagued other crypto projects. This leadership (eg Ethereum foundation) gives crypto projects the air of legitimacy, but also the impression, as Hinman put it, that some managerial work and direction is expected, tipping the scale towards security. If the network becomes decentralized to the point where no one party has sway over its direction (even a good one eg the move to proof of stake), only then can you consider it a commodity, at least in Hinman’s view. Not only does this make sense but it also further speaks to the strength of the bitcoin project, specifically Satoshi’s decision to not be a public figure/BDFL. I doubt this security-commodity issue factored in specifically, but it was really a brilliant and largely unprecedented move that aligns with bitcoin’s political philosophy as well: no leaders.
  • Alex3917 4y ago
    How is this any different than something like GRIN? I'm not involved in either community, but at least superficially they certainly look similar.
    • mistrial9 4y ago
      GRIN does not move more than $1B USD per hour?
      • Alex3917 4y ago
        I meant in terms of not being a security, rather than being a commodity.
    • tromp 4y ago
      If anything, Grin looks more commodity like than Bitcoin, with no artificial cap on supply, and no financial reward for its creators.
  • mtoner23 4y ago
    while it may be smart from a securities/legal/tax persepctive it also dooms bitcoin to be a useless coin. Transaction speeds abysmal and the energy usage is absurd. These could never be changed
• knicholes 4y ago
  Does anyone know how this affects taxes?
  • papercrane 4y ago
    In the US? It doesn't at all. The SEC chair's opinion on if something is a community vs. a security has no bearing on what the IRS thinks. The distinction only really matters when deciding which agency is responsible for enforcing any regulations. As far as the IRS is concerned they treat them the same for capital gains.
  • adrr 4y ago
    I only think it only affects who can buy it. Example gold is a commodity and anyone can buy it. And unregulated security would require accredited investors.
  • drcode 4y ago
    I think it would fall under capital gains either way, so shouldn't matter much. Not a tax lawyer though.
• daniel-cussen 4y ago
  I agree with this. I have said it's the only crypto worth participating in because it's the only crypto that originated for idealistic reasons. In that capacity it is similar to gold, which in the Golden Age (something everybody talked about in Antiquity and I decided to believe, but I've never encountered anybody else believing in) was openly swapped around as little inventions (you can make all kinds of shit with gold, it's a miracle material, lubricant, any precision, single isotope, list goes on endlessly) and gifts, but then some assholes decided to start hoarding it and enslaving people to mine it, charging interest using it, weigh one gold gift against another saying they balance out, use it to pay for wars to amass more gold. And it became something we just hoard underground. In other cultures it's this stuff, like Kechwa (Inca) it was about worshipping the sun and sure enough it basically is the sweat from the sun because it only is created by stars in supernovas. Idealistic in its origin. Except in satellites, in satellites it's used for all kinds of shit, the foil for reentry (silver and gold, but only the gold resisted reentry), as lubricant, for welding (4:1 gold to tin), for the electronics of course, as a conductor in some cases so wire, heat foil. And medicine, so dentistry a huge amount but also implants, gold-titanium alloys. And injections for rheumatism in a chemical composition. And anything that must not rust, the go-to is gold. So all the other coins? They're shitcoins. There is only Bitcoin, everyone else just wanted to get rich quick. Satoshi never cashed out, I divine he committed suicide in 2015 embarrassed not by its success but in how much he owned by being the first to mine it. It was the only crypto that didn't get pre-mined, but he didn't get other people on board fast enough to avoid owning tons of it. So Lycurgus, too, he made the laws of Sparta so they would never be slaves in response to the end of the Golden Age and the constant threat of conquest--basically successful--but was embarrassed of benefitting by then becoming king, so he said "don't change the laws til I return" and left, and starved himself to die. And many say he never existed. Just like many say Satoshi never existed.
  • turdit 4y ago
  • jrm4 4y ago
    The dude in charge looks absolutely ridiculous -- but this is why I'm very interested in Richard Heart and his Hex / Pulse stuff. If you "game theory" him out, I believe he adds up to being in crypto for idealistic reasons as well, despite the appearance of the methods he's using to get there.
• colesantiago 4y ago
  SEC Chair != SEC This is just equivalent to 'employers opinions does not reflect my own'
  • omniglottal 4y ago
    SEC chair delivering speech written by SEC lawyers, on the other hand... this == SEC
• hajile 4y ago
  It's always nice to know that such important things are never left in the hands of the ignorant masses and are instead left to the rich aristocracy who know what is best for lesser men.
• nootropicat 4y ago
  Way too many people hold various crypto for any action now. Sec can barely deal with Ripple and that's one of the easiest ones.
• pazimzadeh 4y ago
  From the original Ethereum pre-sale blog post: https://blog.ethereum.org/2014/07/22/launching-the-ether-sale/ https://blog.ethereum.org/2014/07/22/launching-the-ether-sal... > Ether is a product, NOT a security or investment offering. Ether is simply a token useful for paying transaction fees or building or purchasing decentralized application services on the Ethereum platform; it does not give you voting rights over anything, and we make no guarantees of its future value.
  • AlexandrB 4y ago
    Same feel as "No copyright intended" disclaimers on YouTube videos a few years ago.
  • akritrime 4y ago
    A claim like this was also the reason behind Howey Test being a thing.
  • bawolff 4y ago
    Just because they claim something doesn't make it true.
  • paulmd 4y ago
    Ah yes, the "this ROM is legal as long as you delete it before 24 hours after you download it!" clause. Everyone knows it's not a crime as long as you loudly yell THIS IS NOT A CRIME while doing it. After all why would someone say that if it's not true?!
  • phabricator 4y ago
    Ether's confusing though because the SEC has explicitly said in the past that "offers and sales of Ether are not securities transactions." https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 Gensler's comments today suggest the opposite will be true?
• nathias 4y ago
  Pretty idiotic that they can't make new categories for new tech and have to shoehorn it into the old.
  • JumpCrisscross 4y ago
    > they can't make new categories for new tech and have to shoehorn it into the old Nobody is doing that. For all the new techiness of crypto, its popular failure modes of pumps and dumps, rug pulls and promoters lying through their teeth is identical to the pre-Securities Act securities landscape. So for those narrow problems these proven solutions should work.
    • nathias 4y ago
      But as we can see from anything else, X when digital becomes completely different, it becomes at the same time possible to scale it, to automate it and it becomes international. I fear regulatory capture that will capture all the innovation and profits for US VCs (again).
      • JumpCrisscross 4y ago
        Money is already digital, highly automated and internationally scaled. The American payments/settlement system is arguably more decentralised than blockchains. Crypto brings unique attributes to the table. But being digital, automatable and international aren’t major differentiators. To the degree we’re seeing a persistent class of winners in crypto, it’s not users. And it’s not VCs. It’s Wall Street. Because this is an old, dirty game. Some folks just gave it a new paint job.
        • nathias 4y ago
          There are two companies (Visa, MasterCard) that have a global oligopoly and full control. If you get on a blacklist for one you are done, your internet economic life is over (except crypto). I don't care if Wall Street is profiting by speculation if I'm not excluded myself, the problem is that WS is getting a lot of help with the US regulators that then regulate the global market in a way that excludes poor people.
• formerkrogemp 4y ago
  • kayamon 4y ago
    Bitcoin solves the double-spending problem.
    • AlexandrB 4y ago
      You forgot the last bit: "...without a central authority." There is no double-spending problem in traditional banking because it is not decentralized.
      • kayamon 4y ago
        Perhaps you should read about fractional reserve banking. The same money can indeed be loaned out against ones will and reappear elsewhere in the economy in two different places at once.
• Cobragri 4y ago
  Commodities have no capped supply and fungible. GRIN resembles to commodity with its emmission model and fungibility feature as well.
  • legutierr 4y ago
    > Commodities have no capped supply Since when has this ever been true? Silver is a commodity, is it not? https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday
    • Cobragri 4y ago
      That wikipedia article mentions derivative market silver,it is a contract based silver at futures excchanges. Silver has a perpetual mining for thousand years, like gold.
      • legutierr 4y ago
        Surely there is a finite quantity of silver and gold in the earth, though, is there not? Not all of the silver and gold in the ground has been mined, to be sure, but neither has all of the Bitcoin, either.
  • deleted 4y ago
    [deleted]
• Havoc 4y ago
  That seems quite arbitrary
• riskneutral 4y ago
  Way to fuel the Bitcoin maximalist, Gensler. Totally arbitrary.
• CynicusRex 4y ago
  That's like saying the Christian god is the true god, whereas in fact they're all equal nonsense.
• 12amxn12 4y ago
  Bitcoin is a tool first, and a commodity second. I never "hold" bitcoin, or if I do is for an extremely short while. I've used it plenty of times for almost a decade in this fashion: 1. Get paid in BTC for a service or a product (or buy BTC with offshore money) 2. Sell to someone for an agreed on price 3. Get cash/local currency/supplies/whatever Two thoughts: - Lower hype on bitcoin is a good thing for me, as it will bring less attention to it from goverments. I just need a critical mass of people there are enough buyers/sellers/miners. - The two things that worry me are: governance of the project, and the fact that bitcoin mining traffic can be detected (somewhat like torrents). So, if govts want, they could force the ISPs to check for traffic that may indicate mining, raid, and eventually kill all mining operations (China probably will). Most likely, some countries will be more lax on that.
• black_13 4y ago