Rest Easy, Cryptocurrency Fans: Ether and Bitcoin Aren’t Securities

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The world's second-most popular cryptocurrency isn't an investment vehicle, at least according to the Securities and Exchange Commission. William Hinman, the agency's director of the division of corporate finance, said Thursday that ether—the currency that powers the Ethereum network—shouldn't be regulated in the same way as stocks and bonds.

His statements follow similar ones made in April by SEC chair Jay Clayton about bitcoin. Taken together, the two sets of remarks provide the clearest understanding of how the regulatory agency views the cryptocurrency market. In essence, when a cryptocurrency becomes sufficiently decentralized, as the widely popular bitcoin and ether have, the agency no longer views it as a security. In contrast, smaller initial coin offerings, or ICOs, are almost always securities in the SEC's eyes. That distinction matters, because securities are subject to the same regulations as normal stocks.

“Based on my understanding of the present state of ether, the Ethereum network, and its decentralized structure, current offers and sales of ether are not securities transactions,” Hinman said at Yahoo's All Market Summit: Crypto in San Francisco. "And, as with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value."

'Current offers and sales of ether are not securities transactions.'

William Hinman, SEC

Joe Lubin, a cofounder of Ethereum and the founder of CosenSys, a major Ethereum application company, says he is grateful for the SEC's decision. "We applaud the clarity provided by Director Hinman and the SEC today," Lubin said in a statement. "Ether and other next-generation consumer utility tokens will continue evolving the web towards networks that are more fair, secure, and evenly distributed. ConsenSys looks forward to continuing to engage with regulators around the globe to promote responsible adoption of this transformative technology."

Hundreds of different developers run applications on top of the Ethereum network and contribute to its code. A similar number, if not more, help to develop Bitcoin. "The network and the software development is sufficiently decentralized that there isn't a discernible third party upon whom we would really expect investors to be reliant," says Peter Van Valkenburgh, the director of research at Coin Center, a think tank focused on policy issues facing blockchain technology. That's an important distinction from traditional securities, like Apple or Microsoft stock, in which you're betting on a specific company's efforts to develop products and services and generate income.

The SEC's Hinman notably stopped short of declaring that the initial investments made in ether weren't securities. It's possible that investments made early, before the currency became truly decentralized, could still be viewed as traditional investment vehicles. "The director was pretty clear to not be definitive about that activity," says Van Valkenberg, who also suggests that this indicates the people who got in first—and have likely made the most money—could someday face regulation.

Hinman also said that other cryptocurrencies may become "sufficiently decentralized" in the future, to the point where "regulating the tokens or coins that function on them as securities may not be required." But this doesn't mean all cryptocurrencies can evade scrutiny from US regulators. The SEC has held that most so-called token sales and ICOs are likely subject to regulation, because they generally power a single startup's product or application. ICOs are opportunities for investors to purchase the tokens that power a blockchain startup, typically before its product has gone live.

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Complicating the issue: Many tokens run on top of the Ethereum network itself. So while buying and trading ether is not seen as making a traditional investment, buying and selling specific tokens that run on top of that network would be.

The SEC has ramped up its enforcement efforts against fraudulent ICO schemes in recent months. In December, the agency's new cyber unit announced it had filed its first ever complaint, against the cryptocurrency PlexCorps, for allegedly swindling customers out of $15 million. A month later, it halted one of the largest ICOs ever, for the Dallas-based startup AriseBank.

This doesn't mean all cryptocurrencies can evade scrutiny from US regulators.

In February, the SEC told the Senate's Committee on Banking, Housing, and Urban Affairs that it was open to "exploring with Congress, as well as our federal and state colleagues," whether to regulate cryptocurrency exchanges, websites that allow customers to convert and trade different coins for a fee.

And then in April, the agency charged the two founders behind an ICO that raised over $32 million, for allegedly selling fraudulent and unregistered investments. The scheme had received endorsements from professional boxer Floyd Mayweather and music producer DJ Khaled.

Owners of bitcoin and ether, however, now appear safe from that sort of close scrutiny. That doesn't mean that investing in either cryptocurrency is necessarily safer. Researchers at the University of Texas found that a price manipulation campaign may have partially accounted for an increase in bitcoin's price last year, for example. All that the SEC's declarations really say is that you're betting on an entire ecosystem, rather any one player.

Predictably though, both ether and bitcoin prices spiked Thursday, likely in response to the news.


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Read more: https://www.wired.com/story/sec-ether-bitcoin-not-securities/

SEC says bitcoin and ether aren’t securities

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Clarity is good.
Image: ULRICH BAUMGARTEN/GETTY

The world of cryptocurrency just got some much needed good news. 

With the prices of bitcoin and ether on a steady downward trend, the Securities and Exchange Commission today provided hodlers with a flash of hope: Neither of the cryptocurrencies are considered securities. 

So reports CNBC, which notes that the SEC’s head of the Division of Corporate Finance, William Hinman, delivered the news at the San Francisco Yahoo All Markets Summit: Crypto conference. If the SEC had decided differently, then exchanges and markets would likely have faced some serious regulation. 

And, well, no one in cryptoland likes regulation.  

The announcement was celebrated by big names in both the Ethereum and Bitcoin space. 

Oh, also, it had quite the effect on price. Coindesk shows both ether and bitcoin spiking on the news. 

But all this doesn’t mean the SEC is washing its hands of the entire emerging industry. According to Hinman, many ICOs are in fact securities and will be on the receiving end of SEC regulatory action. 

Interestingly, Yahoo News reports Hinman as explaining that simply calling something a coin or a token makes no difference in the eyes of his agency. More important is the extent of decentralization involved in the network in question. 

“Over time,” CNBC quotes him as saying, “there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required.”

So, you know, better hype up your blockchain project’s decentralized attributes now. It may save you from the SEC’s wrath later. 

Read more: https://mashable.com/2018/06/14/bitcoin-ether-not-security-sec/

Bitcoin bleeds following yet another exchange hack

We're going down again.
Image: traviswolfe/gettyimages

The prices of Bitcoin, Ethereum, and all other major cryptocurrencies have experienced big drops in the last 24 hours, following the news that South Korean cryptocurrency exchange Coinrail has been hacked. 

In a statement on its website Monday, Coinrail said that hackers stole up to 30% of the coins from its storage. 

According to Coinrail, the hackers struck on June 10 and made away with a number of different cryptocoins, including the recently launched Pundi X (NPXS), which makes roughly two thirds of Coinrail’s trading volume. Korea’s Yonhap estimated that a total of 40 billion won ($37.2 million) of coins went missing. 

Coinrail is a fairly small exchange with roughly $2.5 million in daily volume according to CoinMarketCap. “(Coinrail) is a minor player in the market and I can see how such small exchanges with lower standards on security level can be exposed to more risks,” Reuters quoted Kim Jin-Hwa, a representative at Korea Blockchain Industry Association, as saying. Coinrail said it is cooperating with the police investigating the hack and said it will release an announcement with more details as soon as possible. 

The cryptocurrency markets tumbled sharply following the news, with Bitcoin dropping from $7,240 to $6,752 in less than two hours, with the current price being $6,794. The second largest cryptocurrency by market cap, Ethereum, dropped from $570 to $511 before recovering slightly to $533. 

Other major cryptocurrencies experienced a similar drop. EOS, the fifth largest currency by market cap, had it worst of all: It plummeted 15% in the last 24 hours, and is currently trading at $11.2. EOS’s price drop is notable as this cryptocurrency is currently in the process of launching its main blockchain network (also known as mainnet) after having raised a reported $4 billion in a year-long initial coin offering (ICO), dwarfing all similar crowdfunding efforts. 

The Coinrail theft is the fourth major cryptocurrency exchange hack this year. In January, $400 million worth of cryptocurrency was stolen from Japanese exchange Coincheck, and in February, $200 million worth of cryptocurrency went missing from Italian cryptocurrency exchange Bitgrail. In April, cryptocurrency exchange Coinsecure said some $3.3 million worth of Bitcoin were stolen from its wallet. 

The total market cap of all cryptocurrencies has descended below $300 billion for the first time since early April; it currently stands at $297 billion. 

Read more: https://mashable.com/2018/06/11/coinrail-exchange-hack/

Andy Warhol Is a Bitcoin Star for 15 Minutes

The world of finance isn’t done yet with its effort to turn artistic masterpieces into tradeable securities. A decade ago it was hedge funds and bankers selling small shares in works by Andy Warhol and his ilk as investment opportunities. Today it's the cryptocurrency crowd.

If history’s a guide, the risk and cost of owning a tiny part of an illiquid, hard-to-value asset still outweighs the rewards. And all that without ever getting to hang the picture on your wall.

The new tilt at art trading is as much a throwback to pre-crisis financial engineering as it is about crypto-futurism. A British gallery is promising to sell up to 49 percent of Warhol’s 14 Small Electric Chairs in a blockchain-powered online auction. Buyers can pay in Bitcoin, Ether or other tokens. They’ll take cash too if you’re that way inclined.

How To Sell It

Cryptocurrency prices have been hit by a speculative unraveling and a regulatory crackdown

Source: Bloomberg

These micro-stakes would then be traded on a marketplace. There may be a blockchain verifying transactions, and crypto-currencies changing hands, but we've seen art investment pools and art stock markets before. They don't always end well.

Despite all the airy talk about democratizing art ownership and disrupting the gilded world of auction houses and dealers, this doesn’t really do that. Nobody owning a piece of the Warhol will take it home. It's locked up in a tax-free zone somewhere. What’s being traded is a stake in the special purpose vehicle that holds it.

Bank Canvas

A ranking of the world's most valuable artworks, as of Nov. 17, 2017

Source: World Economic Forum

This may be a wonderful way for the ultimate owner to make money from an artwork without taking it out of storage or ceding control, but it's hardly the Barnes Foundation.

As for the idea that this is a clever bet on the future value of a piece of art, these assets are as risky as any others. The art market is illiquid and can be volatile. Blue-chip artists are no protection against a market crash. Even Warhols were sold at a loss during the financial crisis. Do punters know the difference between this “Electric chairs” canvas, which the gallery says has been valued at 4.2 million pounds ($5.6 million), and others by the same artist?

Artistic Temperament

Global art market sales growth tends to fluctuate

Source: UBS/Art Basel

Imagine what the combined volatility of cryptocurrency markets and the art market might create in times of stress. Liquidity would evaporate. That initial buy-in fee of 2 percent wouldn’t seem so cheap then.

Warhol himself might have enjoyed the idea of trading and owning pieces of art that you've never seen. And there is at least one tangible thing on offer: The people running the auction say buyers can choose to receive a special scanned print of the work in question, which to the naked eye looks just as good as the original. As David Bowie once sang in a song about Warhol: “Can't tell them apart at all.”

If people do manage to make money from this, then finance truly will have reached its post-modern apotheosis.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Lionel Laurent at [email protected]

    To contact the editor responsible for this story:
    James Boxell at [email protected]

    Read more: https://www.bloomberg.com/view/articles/2018-06-08/andy-warhol-bitcoins-are-famous-for-15-minutes

    This bitcoin explainer created with AI is phenomenally insane

    Look, understanding cryptocurrency can be confusing. We here at Mashable are dedicated to helping our readers understand the complexities of this new form of currency and how it affects our day-to-day lives.

    But even we are having our collective minds blown by this video, an “explainer” of cryptocurrency created by Botnik Studios that was “written using predictive keyboards trained on dozens of Bitcoin explainers.” 

    And the results are as insane as you might expect: 

    • “To understand how bitcoin transactions are created, randomly pick a number between 1 and 30,000. Now spend that amount of money on Ethereum.”

    • “Despite the risk, one benefit of bitcoin is that you can upload a version of your future self on the dark net.”

    • “The popular form of bitcoin is the ‘Wild Richard.'”

    You get the idea: absolute nonsense poetry.

    Don’t worry, though. If you need to cleanse your mind and get the real ins-and-outs of crypto down straight, we’ve got you covered

    Read more: https://mashable.com/2018/05/23/bitcoin-explained-by-ai/

    Hot damn, this Bitcoin cat just might convince me to HODL

    Yesssssssss.
    Image:  iridi/getty

    Bitcoin true believers have long promised a blockchain-based revolution, but the only true thing of value to come out of Satoshi’s white paper is this chill-ass cryptocat.  

    Sure, the scams and ransomware and general buffoonery in the blockchain space have all been pretty great, but none of that comes close to this Bitcoin maximalist tabby. 

    I mean, just check the dude out. 

    He’s an absolute unit, with bad-boy appeal. 

    Get it.

    Image: iridi/getty

    And! He’s knows how to accessorize. 

    Oh *hell* yeah.

    Image: iridi/getty

    Let’s not overlook the fact that he believes in saving for retirement. 

    Investing in a feline future.

    Image: iridi/getty

    But he’s not stingy, either. Check this party vibe. 

    Crypto rich!

    Image: iridi/getty

    Also, hell yeah to these shades. My man’s got style. 

    Fresh.

    Image: iridi/getty

    Not only that, he makes a coherent argument about the relative value of cryptocurrency versus fiat. (The tie means he’s legit.)

    Farewell to fiat.

    Image: iridi/getty

    So while the market may be volatile, and the entire blockchain industry is basically a solution in search of a problem, at least it gave us this cat. 🙌 

    Read more: https://mashable.com/2018/06/01/bitcoin-cat/

    Coinbase makes it easier for hedge funds to trade Bitcoin

    Coinbase's new trading platform for institutional investors: Coinbase Prime.
    Image: Coinbase

    Cryptocurrency is going legit in a big way.

    Leading U.S.-based cryptocurrency exchange Coinbase is going after institutional investors with four new major products, all of which cater to the needs of professionals and big institutions, making it easier for them to trade cryptocurrencies such as Bitcoin, Ethereum and Ripple. 

    The new products address many of the issues that big investors such as hedge funds face when trying to enter the cryptocurrency market, providing liquidity, safe storage of assets, quality support and advanced products such as OTC (over-the-counter) and margin trading.

    If institutional investors take the bait — and judging by announcements from banking giants such as Goldman Sachs, they will — Coinbase’s new tools will clear the path for an even larger outpouring of money into cryptocurrencies.

    Coinbase Custody, launched in partnership with “an SEC-regulated broker-dealer,” provides safe storage of cryptoassets, paired with third-party auditing. Coinbase claims it’ll draw on its experience of storing more than $20 billion in cryptocurrency to make this the “most secure crypto storage solution available.”

    Coinbase Prime is a platform with all the bells and whistles institutional investors are used to, and by the end of the year it should have advanced tools such as margin trading, algorithmic orders and multi-user permissions. Note that individual investors should use Coinbase’s trading platform GDAX; Prime is for institutions and professionals only.

    Coinbase Markets is a centralized liquidity pool for all Coinbase products, which, besides Coinbase’s digital wallet and exchange, include trading platform GDAX and now Prime. This product will be headquartered in Coinbase’s new office in Chicago. 

    Coinbase claims that more than 100 hedge funds announced plans to trade/invest in cryptocurrency in the last few months alone. 

    Finally, the Coinbase Institutional Coverage Group will work from Coinbase’s New York City office to provide support to clients including research and market operations.

    This is a major upgrade to Coinbase’s product lineup, which has so far been mostly oriented toward individual investors. “There is clear demand from institutional clients and financial services professionals for more specific solutions with regard to cryptocurrencies that address their sophisticated needs,” Adam White, Vice President and General Manager of Coinbase Institutional, said in a statement. Coinbase claims that more than 100 hedge funds announced plans to trade/invest in cryptocurrency in the last few months alone. 

    Coinbase was reportedly adding more than 100,000 users per day in late 2017, when the cryptocurrency craze — and Bitcoin price levels — was going off the charts. The company reportedly had more than $1 billion in revenue in 2017, and valued itself at $8 billion in April 2018. 

    Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH. 

    Read more: https://mashable.com/2018/05/15/coinbase-institutional-investors/

    Consensus 2018: Dispatches from the ‘Coachella of Bitcoin’

    Nightmare fuel has moved to the blockchain.
    Image: jack morse/mashable

    It’s 8:15 a.m. at the Hilton hotel in Midtown Manhattan, and the escalator has a bouncer. 

    An estimated 8,500 blockchain experts and cryptocurrency evangelists have come from around the globe to be here at the 2018 Consensus conference, and the line to pick up attendee badges shows no sign of moving. A security guard in a suit, talking into his sleeve, eventually gives a small group the go-ahead to ride up to the second floor where another line awaits. 

    It feels like we’re trying, and failing, to get into New York’s hottest nightclub.

    “This is like the Coachella of Bitcoin,” a passerby whispers to her companion as they breeze by. 

    You can taste the excitement.

    Image: jack morse/mashable

    And indeed, while it lacks Beyonce and the questionable wardrobe choices of the Southern California music festival, the Coindesk organized Consensus more than makes up for it in its sheer opulence and buffoonery — a fact made obvious before you even walk through the conference doors.

    Parked outside the hotel were three Lamborghinis — an inside joke within the cryptocurrency community — and, opposite them, a man claiming that the developers of NEM screwed him out of over $1.5 million USD worth of cryptocurrency. 

    Across the street was an entirely different type of show: specifically, a fake protest. Chanting “hey hey, ho ho, Bitcoin has got to go,” the group of self-described bankers and CEOs (one man told me he got his suit out of a dumpster) carried signs reading “paper checks use less electricity” and “we thought this was a bubble.”

    According to a rambling statement on the group’s website, the Genesis Mining-backed demonstrators were actually protesting aspects of the financial industry, but either way, they generated enough of a scene to draw a crowd and put conference attendees in what can only be described as an appropriately absurdist frame of mind. 

    Because as soon as those who came to hear the blockchain gospel made it past the aforementioned escalator bouncer and the formidable registration line, they were met with what can only be described as a hodler’s paradise. 

    Want 18-karat gold crypto-jewelry to commemorate your ride-or-die status as a Bitcoin maximalist? Consensus 2018 is the place for you. 

    But can you verify ownership on the blockchain?

    Image: Jack Morse/mashable

    I’ll take two, please.

    Image: Jack Morse/mashable

    And sure, you may know about beer, but have you heard of cryptobeer?

    If that’s not your thing, don’t fret, just make you way over to the cyptopuppy (yes, this dog was described to me as a “cryptopuppy”) named after Margaret Thatcher chilling on the fourth floor. 

    Still recovering from the Mt. Gox hack.

    Image: jack morse/mashable

    But just like the SEC trying to shit all over the decentralized parade, the real world did poke its annoying head into the immutable bubble of joy. That’s right, someone ticketed the Lambos. 

    Sad times.

    Image: jack morse/mashable

    What’s more, in what definitely isn’t a metaphor for the entire industry, it turned out that the fancy cars weren’t even the fruit of early Bitcoin adoption. They were just a promotional stunt

    But push that all to the back on your head, fellow believer. Because if there’s one thing “the Coachella of Bitcoin” makes clear, it’s that these are serious people with serious ideas — even if, as one major player in the cryptocurrency space told me on background, 80 percent of people in the scene are likely scammers. 

    Because scammer or no, at the 2018 Consensus conference we’re all heading to the moon.

    Read more: https://mashable.com/2018/05/14/consensus-blockchain-cryptocurrency-conference/

    Revolut adds Ripple and Bitcoin Cash support

    Fintech startup Revolut is adding Bitcoin Cash and Ripple to its cryptocurrency feature. While cryptocurrency isn’t really Revolut’s focus point, it’s a good way to get started with cryptocurrencies.

    If you have a Revolut account, you can now buy and hold Bitcoin, Litecoin, Ethereum, Ripple and Bitcoin Cash. Behind the scene, the startup has partnered with Bitstamp to process the transactions. Revolut currently charges a 1.5 percent fee for cryptocurrency transactions. There are currently 100,000 cryptocurrency transactions per day.

    Compared to a traditional cryptocurrency exchange, you can’t send or receive cryptocurrencies from your Revolut account. You don’t get a bitcoin address for instance. All you can do is buy tokens in the app. If you want to transfer those tokens somewhere else, you’ll have to sell them for USD, GBP, etc. and then buy cryptocurrencies on a traditional exchange using your fiat money.

    Recently, the startup also announced a new feature called Vaults. Revolut users can set up a vault to save money over time.

    You can round up your spare change every time you make a transaction. For instance, if you pay $3.47 for that delicious ice cream, you’ll save 53 cents in your vault. You can also multiple that amount so that you save multiple times your spare change with each transaction. Many fintech startups also provide this feature.

    You can also set up recurring payments to set aside a bit of money each day, each week or each month. Interestingly, you get to choose the currency of your vault. So it means that you can decide to buy ethers with spare change and weekly payments for instance. It’s a great way to hedge against the volatility of cryptocurrencies.

    Users don’t earn interests on vaults. It’s just a way to set some money aside that doesn’t appear in your main Revolut account. You can decide to close your vault whenever you want.

    Read more: https://techcrunch.com/2018/05/23/revolut-adds-ripple-and-bitcoin-cash-support/

    A Bitcoin mining company just organized a fake protest

    It's the dirty bankers, man.
    Image: jack morse/mashable

    It’s difficult to stand out in the often bonkers world of cryptocurrency.

    With all the scams, hacks, and animated dancing coins, it can be really hard to break through the noise and into the public’s consciousness with your surely revolutionary tech. That’s where the fake protest comes in. 

    As the 2018 Consensus blockchain conference kicked off today in Midtown Manhattan, one bitcoin mining company apparently decided that the best way to make a splash was with a few shouts. As the event was getting started, a group of people could be found marching in front of the hotel hosting the 8,500-person-strong gathering. They chanted slogans like “hey hey, ho ho, Bitcoin has got to go,” and held signs informing anyone who passed by that “paper checks use less electricity!”

    And, as things often go in the world of Bitcoin, everything was not as it seemed. 

    The “protest” was ostensibly organized by a group calling itself Bankers Against Bitcoin, which, as you have probably guessed, is not a 100-percent real protest group. It does have real backing, though. Specifically, that of Bitcoin mining company Genesis Mining

    Importantly, it’s not like Genesis Mining is trying to hide it. As the organizer’s website explains, the company wants everyone to get on the cryptocurrency rocket ship before it’s too late. 

    “This protest is representative of what will happen to those industries and companies that fail to understand times have changed,” explained Genesis Mining CEO Marco Streng on the Bankers Against Bitcoin website. “The consumer abuse that’s been possible due to a lack of competition is over. The biggest competitor big banks have ever faced has arrived and it’s not a company or organization, it’s a decentralized technology.”

    And Genesis Mining is here to help you avoid the soon-to-be grisly fate of the big banks with a “small,” “medium,” or “large” mining package for the low cost of $1,520, $4,440, or $12,960, respectively. 

    Act now! Before it’s too late!

    Image: genesis mining

    We reached out to Genesis Mining with the hope of getting a little more background info on what appears to be, in effect, a well executed publicity stunt. Were the protesters, for example, paid? Unfortunately we don’t know, as we didn’t hear back as of press time. 

    But that shouldn’t surprise anyone. After all, when it comes to making it in the world of cryptocurrency, simply grabbing headlines is often good enough. 

    Read more: https://mashable.com/2018/05/14/consensus-2018-bankers-against-bitcoin/