SEC Rules That ICO Tokens Are Securities (vice.com)

schwit1 shares a report from Business Insider: On Tuesday, the Securities and Exchange Commission (SEC) said that "ICOs" (Initial Coin Offerings) can sometimes be considered securities -- and as such are subject to strict laws and regulations. For the uninitiated, ICOs are a fancy new way of fundraising enabled by digital currencies like Ethereum -- participants invest money and receive digital "tokens" in return. Thus far, it has been largely unregulated, with some ICO crowdfunding events raising hundreds of millions of dollars -- leading some observers to argue that it is a massive bubble. But the SEC's warning means that this free-for-all may not last forever.

"Going forward, according to the SEC, companies that are issuing tokens as part of an ICO (if they are considered securities) need to register with the commission," reports Motherboard. "This will force companies to comply with regulations that ask them to reveal their financial position and the identities of their management. The SEC also concluded that online exchanges where tokens are bought and traded may have to register as security exchanges."

schwit1 adds a quote from Benito Mussolini: "All within the state, nothing outside the state, nothing against the state."

Comments

Overseas

[dohzer]

So launch them overseas. Problem solved.

Re:Overseas

[Anonymous Coward]

So launch them overseas. Problem solved.

The long arm statutes would prevent marketing ICOs to anyone in the United States.

Re:Overseas

[Zemran]

Do you honestly believe that statutes can stop people in the US buying things in Europe? Marketting is done on the internet which is global and sales take place on the internet. This is an unenforcable regulation and therefore stupid. The main hole in their logic is that they cannot come to terms with non physical property. They have searched people coming into the US looking for bitcoin as if they are going to find a physical object. They are regulating something they do not understand. It scares them but they have no idea what to do. Wise countries are embracing the technology but the US is, as usual, acting like a Luddite simply because they lack control.

Re:Overseas

[AHuxley]

Re "honestly believe that statutes can stop people in the US buying things in Europe? "
Depends on the decade and what part of Europe or the EU.
Foreign Account Tax Compliance Act https://en.wikipedia.org/wiki/...
Go full Section 311 of the USA Patriot Act on anymore moving the funds around before, during or after interacting with anything "digital currencies".
Select from never interacting with any bank or international banking network ever again or tell the US about people using any service.
Report accounts or hops of total isolation start to be enforced. Isolate the service and then any bank or nation that still interacts with that service.

Re:Overseas

[Anonymous Coward]

Do you honestly believe that statutes can stop people in the US buying things in Europe

The US Government has powerful methods at it's disposal to enforce compliance, up to and including disconnection from the dollar banking system (aka the financial nuclear option). So yes, I have no doubt that the US can stop pretty much whatever financial activity it doesn't like anywhere in the world. The real question is not can, because clearly they can, but rather will they? It depends upon how easy or hard the enforcement is and how badly they want to do it. Anyway, do you really want to be involved with an overseas "investment" that the US Government deems to be illegal? If you get cheated out of your money, who are you going to complain to? The US Government? People have the same problem right now with shady overseas gambling sites that stiff Americans because they know that they can get away with it.

This is healthy

[Improv]

I have little sympathy for technolibertarians playing word games to dance around sensible regulation. Particularly when they grumble that sensible regulation is fascism.

Re:This is healthy

[Anonymous Coward]

The tragedy is the people that they suck into these schemes that wind up losing large sums of money. Honestly it's criminal and I'd like to see it handled as such. Madoff was small time compared to some of these things.

Re:This is healthy

[bill_mcgonigle]

I have little sympathy for technolibertarians playing word games to dance around sensible regulation. Particularly when they grumble that sensible regulation is fascism.

So you believe that small investors should never be allowed to invest in a company by mutually agreeable terms with the company, without some parental agency dictating the rules and thereby precluding their consensual activities?

Only rich folks should get to do that?

It's hard to tell "smarter than you" from "you're too poor for equal rights" these days.

Re:This is healthy

[Anonymous Coward]

Connotation much? Make sure you call them a name, then label the relation as sensible (twice), then belittle their complaints as grumbling.

Re:This is healthy

[Anonymous Coward]

Madoff was small time compared to some of these things.

I don't think you appreciate the size of Maddof's fraud.

Re:This is healthy

[TooManyNames]

Hey, it worked just fine for the mods... The GP is very insightful, don't you know?

Re:This is healthy

[hord]

Having an office filled with porn addicts isn't paradise either. People keep barking regulation but it also keeps failing us.

Re:This is healthy

[Improv]

The rights I care about are very differently flavoured than "opportunity to invest in a company", but yes. I think it makes sense to block people off from entirely screwing themselves over, and if that means less well-off people (often meaning people with no background in investment) can't invest this way, that's great.

Re:This is healthy

[WhiplashII]

No, the tragedy is that smart people that are not rich are denied access to startup company funding, and so are forced to remain poor.

Fraud laws are sufficient to go after the bad guys. We need to allow more people to invest, not less. We should be encouraging investment as a society.

Re:This is healthy

[Zemran]

"entirely screwing themselves over" like people who invested in Bitcoin a few years back when they were $1 and now have something worth $1600... I wish I got screwed over like that. It does not matter. Such regulation is totally unenforceable and therefore totally stupid. More sensible governments are embracing such things and US people are totally welcome to invest in other countries under their laws. All this does is cut the US out of a growing sector.

Re:This is healthy

[Aighearach]

I have little sympathy for technolibertarians playing word games to dance around sensible regulation. Particularly when they grumble that sensible regulation is fascism.

I know, they're so shocked that they're supposed to be honest about investments that they sell to people. How dare we not be allowed to lie about how much money people will make by giving their money to us?!

They don't seem to understand that creating a "new" equivalent thing that is also being marketed for the purposes of investment is already some type of investment instrument. They were playing a word game, but they were doing something regulated all along.

Re:This is healthy

[Aighearach]

Well, when the rules that they're dictating are related to being honest about investment, then that is called "Capitalism." It is the very action of the government regulating trust to create a level playing field that allows capital to move freely. Without that regulated trust, established parties or the party controlling the information will conspire to keep new entrants out of the market. That is what Capitalism is all about. Read some Adam Smith sometime.

Re: This is healthy

[Anonymous Coward]

How about the people that lost all their coins to exchanges that "lose" access to their investments for whatever clusterfuck reason?

Oh yes, do your research, that's what I recall that scam community parroting. A+

Re:This is healthy

[Anonymous Coward]

No, screwed over like "attended ITT Tech".

Re:This is healthy

[Interfacer]

Not really. If you throw good money at startups that don't even have a decent whitepaper, or that will only turn profitable if they somehow manage to take over the messaging world from whatsapp and messenger (the Status ICO) ... that isn't a tragedy. that is stupidity. Like using your life savings to buy powerball tickets.

Re:This is healthy

[Interfacer]

Oh Please, 9 out of 10 startups fail, if not more. If you are poor (or at least not rich enough to not care if the money is gone for good) then you shouldn't be funding startups.

Re:This is healthy

[infolation]

I don't think you appreciate the size of Maddof's fraud.

Or what Maddof's fraud was, in relation to possible ICO fraud.

Maddoff was able to perpetrate his frauds because he operated a Ponzi scheme within an investment black box that hid the mechanics of what and how he was investing funds.

Good or bad, a DAO or any ICO operating directly on the Ethereum blockchain is, by definition, transparent. Anyone who can read solidity can look at its code and understand what it does, and will do in the future.

If a reckless investor nevertheless puts money into a scheme that isn't governed by a democracy (smart) contract that gives them voting rights on whether the code base is changed, that's their fault. But the code is not a black box, as in Maddof's case.

The SEC exists because, currently, financial institutions operate in a way that is very much un-transparent, and depend on investors trusting that the institutions are doing what they say they will do. Therefore the SEC is needed, to provide oversight of those 'black box' operations.

A DAO is supposed to sidestep this, and enforce transparency by design. Which begs the question: does the SEC even understand why it's not needed to regulate DAOs or ICOs relating to DAOs on the blockchain?

Re:This is healthy

[aaarrrgggh]

I used to think the same way; the threshold of $100k was just there to protect the best returns for the rich. I have reviewed a few second stage funding proposals though (along with running my own business), and have also "lost everything" in the stock market a couple times.

From this experience, I have become reasonably good at cutting through the crap. Sure, an investment in the next GoPro might yield a 5x return over 5 years-- but it is equally possible that it will only have a 5-10% annual return, or that you lose everything. (So, is it worth the risk?)

Quite frankly most people can't make critical decisions with this kind of thing, and the safest bet is to limit investment to the $100k "play money" threshold.

Re: This is healthy

[dnaumov]

You are basically saying only rich people should be starting a business. How about you fuck off?

Re: This is healthy

[religionofpeas]

Starting a business is not the same thing as funding a (someone else's) startup.

Re: This is healthy

[Interfacer]

As religionofpeas said: financing a startup is different from starting your own business. If you are poor and have no money, you shouldn't be throwing it around as VC capital because there is a 90% chance you'll lose it all and you already had no spare money to begin with.

Re: This is healthy

[Kiuas]

You are basically saying only rich people should be starting a business. How about you fuck off?

No, no he isn't Funding != starting. He's saying you shouldn't start a business and fund it yourself if that puts you in personal risk of bankruptcy. There's a major difference between that and 'only rich people should start companies." I've started one company so far, a year ago, with very minimal capital because we don't need to make heavy investments as a small IT-firm with all of us being able to work from home. If the company goes under, the amount of money that each of us will lose is such that it won't be a major problem.

Startups fail at such a high rate mostly because people starting them don't realize how long it can take to start turning a profit. Even companies with solid business ideas and skillful people can fail because they haven't budgeted for the fact that they may well be running at a loss for the first 2-3 years. This creates a feedback-loop of failure wherein the urgency to get money flowing to the firm often drives them to push stuff out to market sooner than would be wise, which further contributes to their downfall.

If you're planning on setting up a business and the monthly operating costs are such that you and the other owners cannot cover them by yourselves without risking your own financial safety, then you need to seek outside funding. That's the whole reason shares were invented in the first place: limited liability.

The issue here is that certain types of ICOs function exactly like securities but have been unregulated. If this would have been kept going this opens a door for financial institutions to circumvent securities-related regulations by changing their securities into coins. It cannot be argued that this needs to be allowed 'for the sake of poor people getting funding for their startups' any more than it can be argued that I should be allowed to run a Ponzi.scheme to collect capital for my company.

Re:This is healthy

[MachineShedFred]

especially startups that don't actually have a product or plan except wishes and other people's money.

Re:This is healthy

[DigiShaman]

Hahahaha!! Buddy, the US is already 20 TRILLION in debt. Other nations are going cashless and clamping down on how much money you can move around. Nation states, around the world - especially the US - fear that the US dollar won't just go into hyperinflation, but as a standard be abandoned all together like a used husk. Crypto currencies would be a money system without borders, much like the Internet. That freaks the fuck out of governments all over as it robs them of political power to oppress their constituents.

We will see. There's nothing that prevents more alt-coin standards from being created. But yeah, what cannot go on forever, wont! And you can take that to the bank. LOL

Re: This is healthy

[Anonymous Coward]

ICOs are generally not "coin" but simply a promise of partial stake in the future. Thus they are more like securities and less like deposits than you seem to be willing to concede.

Re:This is healthy

[Tenebrousedge]

the US is already 20 TRILLION in debt

That number includes debt owed by the federal government to itself. The bad day for the US is not when we have lots of outstanding debt, but when no one wants it any more. The actual $13.62T of debt is an enormous bet that the US will remain solvent. No informed persons worry about hyperinflation, and the topic of public debt is not particularly relevant. The SEC is attempting to regulate ICO tokens as investment vehicles because people keep trying to use them as such. There is zero reason to believe in the rest of your fantasies.

Re:This is healthy

[Anonymous Coward]

fuck you, you fucking authoritarian piece of shit. worry about yourself and your dumb little vaccine damaged children, dip shit gmail using, suck up slave.

Re:This is healthy

[Improv]

It's easy to praise this when investments go well. But were you to actually treat this thoughtfully and consider the actual "screw yourself over" case, you might reach a different conclusion.

Re:This is healthy

[chuckugly]

In what way does it beg the question?

Re:This is healthy

[Anonymous Coward]

I hope you're not in the middle of making a grammatical error. The modern usage of this phrase is the only remotely correct one. "Begging the question" is a bad translation of "petitio principii", which is itself a bad translation from Greek sources. There was a brief historical period where if you were only half-educated (i.e. you didn't know Latin) then the phrase could be considered to correctly refer to the style of argument. At this point there's no particularly good reason to use the phrase that way, especially since it can be ambiguous.

Re:This is healthy

[Anonymous Coward]

especially since it can be ambiguous.

The ambiguousness is the very reason for railing against the error. "Raises the question" is perfectly fine, so why sully the original? Why, for example, lose good words like "awesome", which is now so diluted that it can't be used for its proper meaning? Each of these encroachments make the language worse and less precise of a tool. The latest candidate for dilution seems to be "refute". It has a precise and specific and quite useful meaning, but it's all the rage now among journalists to use in it place of "deny".
OK, soapbox stowed. Please resume your regular Slashdot.

So we start with Godwin and work our way back?

[Frank Burly]

The actual statement by the SEC is here: https://www.sec.gov/litigation....

It looks like people are investing money to obtain an interest in an item with no practical use other than as an investment

I am reminded of https://xkcd.com/1494/

Cows are already out of the barn

[xxxJonBoyxxx]

>> "Going forward, according to the SEC, companies that are issuing tokens as part of an ICO (if they are considered securities) need to register with the commission..."

I hope they realize that almost a thousand different cryptocurrencies already exist:
https://en.wikipedia.org/wiki/List_of_cryptocurrencies

Re:Cows are already out of the barn

[phantomfive]

They can start arresting them one by one, and the cows will all return. No cow wants to be made an example of.

Re:Cows are already out of the barn

[Anonymous Coward]

They can start arresting them one by one, and the cows will all return. No cow wants to be made an example of.

Or maybe, since the "cows" are generally a bunch of tech nerds and the Federal Reserve is all computerized, a few of the "cows" might decide to put on their 'hacker' horns and bring the US financial & banking system down if the government goes too far.

Re:Cows are already out of the barn

[Anonymous Coward]

I wish I was hard like you. Do you have like all tattoos and stuff?

Re:Cows are already out of the barn

[Anonymous Coward]

yeah, right. the pigs are going to get their throats ripped out like the soft little piggies they are. then we'll come for the sheep like you, bleating, unprotected in your pens.

Oh puh-leeze. Mussolini?

[ClickOnThis]

I understand that many advocates of digital currencies sing the praises of their libertarian, state-independent qualities.

But conflating the SEC with Mussolini? Come on, the purpose of the SEC is to protect investors from unscrupulous companies. Do you really want the kinds of markets we had before the SEC was around?

Re:Oh puh-leeze. Mussolini?

[fred911]

". Do you really want the kinds of markets we had before the SEC was around?"

  No, but I do want the type of SEC that was in operation before the Clinton(s) were in office. You know the one that required transparent, orderly and fair markets for all buyers and sellers (not just for club members)?

Re:Oh puh-leeze. Mussolini?

[meglon]

Yeh, let the anti-government fucks lose all their money to one of these unregulated con-jobs, then see what they say. These idiots aren't libertarians... they're just idiots.

Re:Oh puh-leeze. Mussolini?

[anarkhos]

the purpose of the SEC is to protect investors from unscrupulous companies. Do you really want the kinds of markets we had before the SEC was around?

It's irrelevant what the purpose of a law or agency. The only thing that matters is its effect.

Yes, the markets functioned better before the SEC. The real intent of the SEC is to make sure you're not allowed to invest in competing financial instruments and to make investors completely and utterly gullible.

Re:Oh puh-leeze. Mussolini?

[Anonymous Coward]

Where do you folks come up with these narratives?

Re:Oh puh-leeze. Mussolini?

[religionofpeas]

These idiots aren't libertarians... they're just idiots.

There's a big overlap.

Re:Oh puh-leeze. Mussolini?

[NoMaster]

Not to mention the Mussolini quote dates from 1928 - a time when the USA didn't have a "rah rah democracy" foreign policy, fascism was considered a valid style of government and not a dirty word, and Coolidge, Hoover, and FDR were supportive of what they saw as a libertarian progressive Italian government that would resist Communism...

Re:Oh puh-leeze. Mussolini?

[Anonymous Coward]

Where do you folks come up with these narratives?

Take off that team jersey and the blinders.

See that great big world and universe all around you and all that...stuff...happening?

Yeah...

Re:Oh puh-leeze. Mussolini?

[AmiMoJo]

Yes, the markets functioned better before the SEC.

Yeah, 1928 was glorious. Maybe read the Pecora Commission's report on how awesome that time was for investors.

Re:Oh puh-leeze. Mussolini?

[Anonymous Coward]

god damn you are a fucking retard

Re:Oh puh-leeze. Mussolini?

[Anonymous Coward]

Okay, I'll bite. I'd like clarification on exactly how the Clinton administration made investing a members only club. Which specific legislation was passed that does what you claim? Without providing that I'm inclined to think you are just somebody who watches too much FOX news and believes whatever FUD they are saying.

If you thought you, as an individual investor were ever playing on fair ground, you are deluded. I've been working in investment banks, specifically on building trading systems, for over 20 years. I've been dealing with Sarbanes-Oxley (SOX), Dodd-Frank (which was passed during the Clinton administration), Volcker, OCC, and FINRA/SIFMA/MSRB just to name a few, and that's just in the US (MiFID, *shudder*). I'm not aware of any regulation passed during the Clinton administration that would have the effect you are claiming. Retail/Individual investors have been getting screwed since the beginning of the stock market. They are just more aware of it now.

Many regulations have been passed, but my experience has been they mostly provide great overhead and expense to the banks and provide no net benefit other than letting politicians tell the public they've done something.

Some regulations have come out over the years skewing things towards the Investor by putting requirements on banks to prove they didn't front run, acted in the best interest of their clients, provided best execution, and delivered clear documentation and explanations of the securities sold. Trump is now looking to roll most or all of these back. You could argue this is good or bad for different reasons.

Possibly you are arguing that the failure of government to place regulations around High Frequency Trading, dark pools, etc. was a mistake, and you may or may not be right on that, but I doubt that's what you are saying. If so that would hardly be on the Clinton's alone.

So, I'm asking you to provide some references/proof. My mind is open to it.

Re:Oh puh-leeze. Mussolini?

[Neuroprophet]

Clarification: When I say Dodd-Frank passed during the Clinton's, it was when Hillary was a Senator, I'm assuming you are including that as part of the "Clinton Administration". At least when I deal with most people who hate the Clinton's anything done while either one of them was in office that they don't like was a Clinton's fault...

Re:Oh puh-leeze. Mussolini?

[Anonymous Coward]

>Yes, the markets functioned better before the SEC.

I love pyramid schemes and corporate fraud schemes, especially Enron. It's a damn shame that such a wonderful company, complete with excellent shell company names, had to go down because the SEC keeps meddling in their sovereign affairs.

Re:Oh puh-leeze. Mussolini?

[Anonymous Coward]

Well that sure was a compelling argument.

Re:Oh puh-leeze. Mussolini?

[ClickOnThis]

Clarification: When I say Dodd-Frank passed during the Clinton's, it was when Hillary was a Senator, I'm assuming you are including that as part of the "Clinton Administration".

Hillary Clinton moved from the Senate to Secretary of State on January 21, 2009. Dodd-Frank was proposed by the Obama administration in June 2009, and was passed on July 21, 2010.

So no, Dodd-Frank was not passed (in fact, was not even under construction) while Hillary Clinton was a Senator. She may have been "in office" as Secretary of State, but was not in a role that had any significant influence on the crafting of Dodd-Frank.

Re:Oh puh-leeze. Mussolini?

[ClickOnThis]

It's irrelevant what the purpose of a law or agency. The only thing that matters is its effect.

The only thing that matters? Unlikely. But, um, okay...

Yes, the markets functioned better before the SEC.

FACEPALM. That is all.

The real intent of the SEC is to make sure you're not allowed to invest in competing financial instruments and to make investors completely and utterly gullible.

Wait ... didn't you just claim that an agency's purpose (i.e., intent) is "irrelevant?"

The rest of your statement is hard to disentangle, but here goes.

Unregulated financial instruments are a potential threat to the investing consumer, who must rely on the proper behavior of fiduciaries who are not compelled to behave transparently. Such instruments can "compete" just fine with regulated ones ... by becoming regulated. The effort is not trivial, but it is not onerous either.

As for the SEC "making" investors gullible ... no, the SEC does not make investors gullible. They may or may not already be gullible. The SEC just ensures they have the information they need to make informed choices, so if they're still gullible, they have no excuse, and it's certainly not the SEC's fault.

Thanks

[phantomfive]

schwit1 adds a quote from Benito Mussolini:

Thanks, I wasn't sure if I should be outraged or not: now I know. sharp intake of breath, with fear and outrage.

Re:Thanks

[PPH]

Avoiding a Godwin Law ruling on a technicality: Good job schwit1.

Re: You know what else rules?

[Anonymous Coward]

so happy so see another poster take up the effort to get my DAMN balls sucked

+1 informative for parent

Re: You know what else rules?

[Anonymous Coward]

Oh, you're the "DAMN balls" guy? I've always admired your posts!

Operative objective = "profits"

[Anonymous Coward]

SEC regulations apply to investments, and investment contracts. An investment contract is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. SEC v. Edwards, 540 U.S. 389, 393 (2004). Howeveah - ICOs that do not have any expectation of profit would be outside the scope of SEC regulations. Token purchasers would be buying something else....for example, the right to demand a custom feature, the right to name a product, admin rights on a platform, or something other than shares in the company.

Re: You know what else rules?

[Anonymous Coward]

Indeed I am! I capitalize DAMN as a signature lol

Re: You know what else rules?

[Anonymous Coward]

I also post about giving swirlies to nerds lol

Court Challenge

[LeftCoastThinker]

I predict a court challenge in 3, 2, 1... Seriously, Etherium, Bitcoin and the like are unique mathematical stores of value, more similar to that rare drop you got in your MMO than a security instrument.

Re:Court Challenge

[DerekLyons]

Seriously, Etherium, Bitcoin and the like are unique mathematical stores of value, more similar to that rare drop you got in your MMO than a security instrument.

It's funny... all the alt.currency advocates were all about how "cryptocurrency is real money" - until the government started actually treating them as real money. Now they're backpedaling.

Re:Court Challenge

[Interfacer]

If I hadn't already posted I'd have modded you up. Either it is money or it is glorified pokemon cards. You can't have it both ways. Tbh I think it is good if it's going to be treated like money. I'd love for institutional money to flood in. Especially since I am already holding coin.

Re:Court Challenge

[Anonymous Coward]

i don't care about governments too much, they have already peaked anyway. bitcoin is decentralized, no money grabbing ICO and fair distribution. works with or without government support.

Re:Court Challenge

[Anonymous Coward]

Well, the US government still doesn't treat it as real money. The SEC doesn't treat CAD as a security. The Bank of Canada doesn't need to issue a prospectus when they're printing bills.

The chief difference between a security and a (crypto)currency is that securities have their value backed by company promises. Such a promise is a proper subject for SEC overview. But BTC and the like have the same lack of promises as the USD after 1971, so there's no point in enforcing such promises.

Re:Court Challenge

[DigiShaman]

Either it is money or it is glorified pokemon cards. You can't have it both ways.

Yes, yes you can have it both ways, or rather it can be both ways depending on what the overall market says it is. One day your crypto-coin is worth value, another it can be halved or buried into a worthless group of numbers as the standard is abandoned.

Re:Court Challenge

[Anonymous Coward]

But an ICO is, again, backed by company promises. The fact that you buy ICOs with Etherium doesn't change the fact.

The SEC isn't saying that Etherium is subject to the SEC, only the ICOs, which is consistent with the idea of ICOs being securities and Etherium being money.

Re:Court Challenge

[mysidia]

Now they're backpedaling.

Not really... it's "Real money" in the sense that you can reliably transact with it.

It's not "Real money" in the sense that it is not a government-issued currency.
Unlike real money, the government didn't make it and retain the rights to it --- so it's "More real" than money in the sense that it is more like tangible property with intrinsic value, and not something that can be arbitrarily manufactured.

Re:Court Challenge

[DerekLyons]

Either it is money or it is glorified pokemon cards. You can't have it both ways.

I've pointed that out many times over the years... it's a deep flaw in the basic philosophy of crypto-currency - they want it both ways. They want legitimacy, *and* they want complete freedom with no controls or regulation. They don't grasp that the latter is a necessary consequence of the former.

Re:Court Challenge

[swillden]

Either it is money or it is glorified pokemon cards. You can't have it both ways.

I've pointed that out many times over the years... it's a deep flaw in the basic philosophy of crypto-currency - they want it both ways. They want legitimacy, *and* they want complete freedom with no controls or regulation. They don't grasp that the latter is a necessary consequence of the former.

Some probably do want exactly what you say. Others recognize that as a financial instrument regulation is inevitable, but still see value because although it's subject to regulation, the supply of a cryptocurrency doesn't have to be subject to any central control, unlike fiat currencies.

regulation time

[Anonymous Coward]

The rich bribe the communists elected by the poor to pass laws making it more expensive to raise capital. The rich have no problem paying the extra expense and pass it on in the cost of the products they sell the poor. The poor are locked out of the competition for capital and vote for the communists for survival.

Local laws apply.

[DrYak]

Depends on the decade and what part of Europe or the EU.

US law do not apply anywhere else except in the US, no matter what some think.
What applies in countries in Europe, are international treaty that the have decided to adhere to and sign,
and local regulation.

Go full Section 311 of the USA Patriot Act on anymore moving the funds around before, during or after interacting with anything "digital currencies".
Select from never interacting with any bank or international banking network ever again or tell the US about people using any service.

It's a US law. It applies to the US. You cannot force - directly through government - a foreign institution to comply.
The only way the US can force foreign institution to comply is by putting a tax on any transaction that they have with dollars.
Or refuse to do interactions altogether with them.

Isolate the service and then any bank or nation that still interacts with that service.

...and some bank are completely happy with not doing any dollar transaction anymore and only transacting in Euros, Rubles, etc.

Re:Local laws apply.

[Anonymous Coward]

Banks unable to do business in the US find themselves quickly marginalized. The fundamental problem for them is that they're operating in a network environment - interbank payments are expected to work. The US can effectively sever the network in 2, with a part that respect US laws and a part which does not. It's already established US policy that dealing with blacklisted companies gets you blacklisted as well.

So, your notion that you can force a company to obey US laws only by "putting a tax on any transaction that they have" is flawed. You force them to obey by making them into pariahs if they don't.

The only viable defense to this is when the EU steps in to stop such US blacklists, e.g. by forbidding EU companies to comply with the blacklist. This is a nuclear option as it basically shuts down transatlantic trade, with companies unable to obey both laws. This is why in practice you only see such blacklists work for specialized areas (arms deals, terrorism financing)

Re:Local laws apply.

[AHuxley]

Some nations banks thought they could escape Section 311 of the USA Patriot Act.
The sanctions go after the bank that does the transactions and any bank that deals with that bank.
Then the nation allows the bank to operate.
Nations and banks then have to disconnect from the US and most other banks or just stop doing the transactions.
Report all the users and everything is back to normal.
Foreign institutions have to comply or they cannot get access to the world banking community.
Re "putting a tax on any transaction".
Its a total disconnection.
Re "not doing any dollar transaction anymore and only transacting in Euros"
Any bank offering that service is then also discovered and isolated.

Re:Local laws apply.

[Anonymous Coward]

Yeah, ask banks in Iran how violations of US law only has consequences inside the borders of the US.

Re:Local laws apply.

[Gr8Apes]

US law do not apply anywhere else except in the US, no matter what some think. What applies in countries in Europe, are international treaty that the have decided to adhere to and sign, and local regulation.

US law doesn't, but the treaties that have been signed and the effect of the gorilla cutting you off are certainly more than effective to convince many to cooperate.

It's a US law. It applies to the US. You cannot force - directly through government - a foreign institution to comply. The only way the US can force foreign institution to comply is by putting a tax on any transaction that they have with dollars. Or refuse to do interactions altogether with them.

Economic pressure is huge. Do recall the US is 25% of the world's market, and far more in trade and trade related partners. If I had to guess, I'd say better than 70% of all trade is tied directly to or controlled by the US either internally or via US corporations subject to US laws.

Isolate the service and then any bank or nation that still interacts with that service.

...and some bank are completely happy with not doing any dollar transaction anymore and only transacting in Euros, Rubles, etc.

Yep, let's look at Russia, the largest country by area with immense natural resources and roughly half the population of the US, yet less than 1/10th the economy. They're doing swimmingly. Iran with half the population and less than a quarter of Russia's economy. Venezuala, a super oil-rich country with a little over a third of the population of Iran does a little better at 3/4s of the economy of Iran, but that's still terrible compared to the numbers of any of the other countries that play with the US and partners.

Re:Local laws apply.

[mysidia]

You cannot force - directly through government - a foreign institution to comply.

Right, but the foreign banks will choose to comply, because if they don't BACKUP WITHOLDNG will activate against that institution and apply to ANY funds transferred from overseas into a US-based bank.

Options

[DrYak]

The US Government has powerful methods at it's disposal to enforce compliance, up to and including disconnection from the dollar banking system (aka the financial nuclear option).

and some institutions are completely fine with this, having enough other altenative options / big currencies.
Euros, Rubles, etc.

US Dollars haven't been the only internationally relevant money for quite some time.

Re:Options

[Gr8Apes]

and some institutions are completely fine with this, having enough other altenative options / big currencies. Euros, Rubles, etc.

US Dollars haven't been the only internationally relevant money for quite some time.

Euros are directly tied to the US, even though they, the Yuan, and others are bucking for a new internationally based basket. It hasn't happened yet, but with the US being run by an ADD pinhead with the political finesse of an elephant with explosive diarrhea, such a decision is likely to happen sooner than later.

Buyer Beware

[Anonymous Coward]

SEC should butt out. This is the market!

It's called Consumer Protection

[Anonymous Coward]

and it is the job of any legitimate government.

Re:It's called Consumer Protection

[Anonymous Coward]

The job of any "legitimate government" is to impose a tyranny by seizing control and money away from the people.

Sorry, I don't view that as legitimate in any way, and I won't go along with it.

Re: It's called Consumer Protection

[Anonymous Coward]

Retard!

"All within the state, nothing outside the state"

[Anonymous Coward]

Remind me, the money that the people placing the ICO are looking to get in exchange, is that the money issued by (and essentially guaranteed by the power of) the state? Thought so.

Local (meaning national) laws apply. Good.

[XXongo]

You're missing the fact that the EU also has regulations covering financial services to deter fraud, of course (look up "European system of financial supervision".)

So, basically, the article says that the SEC ruled that regulations to deter financial fraud apply.

This is actually good, not bad.

Except if you're a libertarian, and consider the right to be defrauded to be a form of "freedom"

Security or Money

[Anonymous Coward]

I support the SEC ruling 100%.

Both Crypto-Currency and Securities
- Are actively traded commodity that are not backed by anything.
- Transactions are tracked by a document showing the owner and purchaser.
- Can be traded / bought / sold
- Are converted from government backed money by some entity
- Value varies with number of transactions and several other factors.

The ICO "bank" are not regulated meaning converting back and forth from government backed money are not guaranteed. The average Joe has little recourse when a "bank" runs away with real money and leaving the customer with worthless notes.

Smart Contract

[GrEp]

An ICO is just a smart contract software as a service. The company running the SAAS pays taxes on the ICO, those who buy them treat it as a service expense. If they sell their tokens they pay tax on the income.

The Fed is completely over-thinking this.

FUCK the SEC

[Anonymous Coward]

Another government agency attempting to control our lives. We do not recognize their claim and will not comply on any level.

Re:FUCK the SEC

[Anonymous Coward]

here, here! good luck trying to enforce your antiquated notions of government with your fucking windows xp and idiotic IT personnel. dumb fucks. you'll be doing it without any of my money, that's for sure. guess you'll have to harvest some baby parts or something to pay for your stock cops. your recompense is being gathered prepare to receive it.

VICE IS FAKE NEWS

[Anonymous Coward]

The headline on slashdot and Vice are both false, this is fear mongering from finanical insitutuions who have major influecne over main stream media. Some ICO are considered securities, not all. The supreme court defines what is a security, in this particuar case refer to the "Howey Test".