Lives of Truth

My recent birthday celebration came, and, in some ways, I barely noticed- there was news—affecting news, causing a distraction. We lost the presence of Senator McCain and Aretha Franklin. In the days that followed through today the nation, writ large, experienced a celebration of these lives; they were lives distinguished by their embrace of truth.

When first I heard Aretha perform, I realized she was part of a long and brilliant tradition. Greatness in music, these Black Divas reached me and millions- something about the way they moved the air, moved human spirits. We could soar or mourn with equal depth, they involved us. She made us move our feet to the rhythm of her words; she also made us open eyes to see the ugliness of the world and that we are left to change it. I could chart phases of my life by Aretha’s albums, tapes, and CDs that I purchased and, in some cases, played until they were worn thin. When I wrote about her—I said a little prayer.

Senator McCain was often the rival of my political ideals, and just as often a champion of a cause with which I identified. He stood strong for decency and equality. Senator McCain lived his patriotism; he gave his body and spirit to his country. He championed the fights against forces that steal freedom; he knew they first stole truth. Truth is the first victim of evil. We honored Senator McCain as if he were a national leader—for in a leaderless time- we all looked to him, turned our yearning eyes to him.

Living in truth; it is the example of a way to live and a way to depart the world. Living in truth is the acceptance of the great gift of life and the great obligation that accompanies existence- we have a debt to eternity, to realize that life is all that we know, and to make it better for every other life.

We live in an age that tests truth- that bends the modern miracles of communication and technology to the pettiness of a long dead age. There is no truth to supremacy; there is greatness in gratitude, there is immortality in sacrifice, and there is love—as the only thing we can create in life and keep forever.

Greater Clarity on Cryptocurrency and Securities Regulation

Greater Clarity on Cryptocurrency and  Securities Regulation

The Securities and Exchange Commission has billowed  a fresh breath of life and clarity into the legal status of Ethereum, Bitcoin,  and other cryptocurrencies. The policy states that without more, they are not securities within the meaning of the Securities Act. 1/ The policy states that Bitcoin and Ethereum may not be regulated as a security when issued and used as a medium of exchange. In essence, the determination of whether an ICO or token is a security depends on the terms of  the issuance. It revolves around the question: would a reasonable investor rely upon a seller’s commitment to do some future act to gain profit on the investment? ( See the full remarks here  of William Hinman, Director of Corporation Finance, SEC, June 14, 2018)

The traditional test of a regulable instrument is similar( see e.g.  SEC v. Howey). It is based in the expectations created by the terms of the initial public offering. The question appears to be : whether the buyer or investor must rely upon the ICO issuer to perform some specific or general mission. If yes, then it may be a security, but if not, then it probably is not. Bitcoin and Ethereum are such generally circulated tokens that buyers do not appear to be motivated or enticed by any particular or general undertaking by the issuer.

The opinion notes that among the uses of cryptocurrency are  personal and commercial transactions in which the cryptocurrency is a simple medium of exchange. Some Asian issues have had this design- a currency meant for everyday usage to buy good and services, sell products, provide loan funds,  serve as an asset when a business seeks to borrow funds .

In an announcement at Yahoo Finance’s All Market Summit: Crypto in San Francisco on Thursday, the U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be classifying ether or bitcoin as securities.2/

The keys to the SEC analysis include the nature of the blockchain that supports the currency.  The opinion seems to focus on Whether the blockchain structure is decentralized; presumably, this relates to the absence of  a central control by the issuer.  The logic of this position  is not readily apparent given the essential construct of the blockchain as a distributed ledger. The ruling is important to the future direction of cryptocurrency, the situation with currency exchanges may differ substantially in a regulated environment.

The SEC policy is  an opinion that will have legal effect in SEC proceedings; presumably federal and state courts  will rely upon the SEC’s administrative expertise and follow the advice when considering claims concerning regulation and investor rights in cryptocurrency.

<h3> The Lesson is in the Purpose</h3>

Many ICO’s will be regulated securities under the new SEC rule because they are tied to particular promises , projects, or themes. The investor would have a reasonable expectation of some further or continuing action by the issuer to affect the value of the coin. That expectation defines the classic area of securities regulation. The investment policy protects investors against offers that have big promises and no delivery. These empty promises leave investors adrift and diminish public confidence in the financial markets.

<h3>Greater Clarity? </h3>

If you are in the process of putting together an ICO, does the SEC announcement  provide guidance?- Can you now choose to shape a regulated or deregulated ICO?  You will likely still need a battery of high-priced legal and crypto experts to get the desired outcome. 

Liquidity is a prime consideration and a regulated currency issue may have greater liquidity among institutional investors that have begin shopping the cryptocurrency exchanges in greater numbers than before. A successful ICO might have to thread a needle between broad appeal and generating liquidity and narrow appeal to inspire participation. For example, a project aimed at environmental improvement might have to emphasize a generic effort rather a just some specific projects. On the other hand, some ICOs will more clearly leans towards regulation and the challenge will be to find exchanges that can provide liquidity for a regulated ICO and token.

- Trend toward Regulation and Broader Markets

There have been some important cryptocurrency  developments and news in the area of the NYSE, Crypto-derivatives, CoinBase, and Gemini. These events move towards some greater acceptance of regulation and broadening the cryptocurrency markets to accommodate institutional investment and hedge funds. SEC clarification of the status of cryptocurrency will likely hasten those trends.

Note: Blockchain is not Bitcoin or any other currency, and blockchain technology has many uses outside of cryptocurrency. Bitcoin might be thought of as an application in an operating system. Blockchain is the system.

1. SEC announces cryptocurrency ether is not a security

https://finance.yahoo.com/news/sec-announces-ether-not-security-162658147.html

2. SEC director says Ethereum does not fall under securities regulation

https://www.zdnet.com/article/sec-director-says-ethereum-does-not-fall-under-securities-regulation/

3. Bitcoin and ether are not securities, but some initial coin offerings may be, SEC official says

https://www.cnbc.com/2018/06/14/bitcoin-and-ethereum-are-not-securities-but-some-cryptocurrencies-may-be-sec-official-says.html