In the recent SEC lawsuit against Coinbase, our beloved token ICP entered the security list. What will be the next steps now? Will it be necessary to make regulations by the foundation (for example) to become compliant? How does it work?
Icp fails to meet the third criteria of the howey test. I wouldn’t worry about it.
From these two paragraphs, it’s possible both criteria for the expectation of profits and the profits being derived from the efforts of others have been met.
- A month after it was launched for public trading, ICP’s price reached an intraday
high of $700. One month later, the price of ICP had plummeted to $72 and Williams began making
public statements indicating the price of ICP would increase again. For example, on June 10, 2021,
Williams tweeted, “Major [venture capital] firms … hv [sic] long-term strategies & generally don’t
panic dump. Their focus is on moonshots because that’s what generates their primary returns. We
all need to keep our focus on horizon. Watch what happens in +6/9 months.” And, on September
3, 2021, Williams tweeted, “ICP seed investors’ 2000X gains; crypto’s largest research org; most
advanced blockchain; ferocious growth.”
- In an ICP whitepaper released in January 2022, DFINITY promotes that it burns
ICP tokens as a mechanism to support the price of ICP by reducing their total supply. On January
20, 2023, Williams tweeted, “$ICP will eventually become deflationary”—meaning its supply will be
reduced over time. On its website, DFINITY posts a Dashboard that calculates the ongoing cycle
burn rate, reflecting the number of ICP tokens burned. As with other crypto asset securities set
Case 1:23-cv-04738 Document 1 Filed 06/06/23 Page 67 of 101
forth herein, this marketed burning of ICP as part of the system’s “deflationary” mechanism has led
investors reasonably to view their purchase of ICP as having the potential for profit.
Is this not a just US specific issue?
Because of US global influence on economics and regulation, this can have ramifications elsewhere.
I think it’s just an opportunity for other countries to take over the crypto space to a greater degree. The us has cracked down on various banking and investments products before and they just all moved their headquarters to other countries.
I wouldn’t stress to much about it.
First off, I think this is a lot of posturing and narrative building since the CBDC from the FED is coming out in July, and they want the digital dollar to be viewed by the public as the safe/legitimate option.
The USA won’t let Asia get the upside of the emerging Web3 industry forever though, so when they are ready to change the narrative back to crypto-positive they will. This lawsuit gives them the ability to sway the narrative back and forth in the headlines for a few years.
Secondly, the worst that could happen is a full crypto ban. China has done that, but even at the height of their attack on crypto, web3 had a vibrant Chinese community even on ICP, and their culture is way more obedient than the USA citizens. Frankly, us American’s hate our own government so much right now that general interest in crypto would probably grow like crazy if they decided to actually come down hard on it. Nothing proves the need for crypto better than a greedy and corrupt government!
In conclusion, this is no different than all the times crypto dipped based on negative news from China, it’s a good time to fill bags! It’s either crypto or the dollar, which one do you think will still be around in 20+ years? I’ve got like 30 years of career left, and don’t think my retirement will be stored and used in USD, lol!
Excellent summary @aiv
You’ve captured the key points perfectly
Since the Howey test defines by transaction I don’t feel ICP meets the criteria of 2 of the 4 tests.
- Money is invested. Obviously.
- There is an expectation the investor will earn profit. Not in every transaction. ICP can be converted to cycles. There is no expectation of profit from this transaction. This is like saying Apple can pay its bills using shares of APPL. They can not.
- The investment is a common enterprise. It’s obvious ICP is not strict vertical. So they must be suggesting horizontal commonality. Like an ETF. The transaction in criteria 2 above breaks this commonality as not every transaction is pooled into a fund that exposes investors to profit and risk.
- Profits are generated via the efforts of others. This is True. Users are key.
U.S. law doesn’t let appointed regulators override elected official. But the SEC head may be doing exactly that.
When Gary Gensler’s Securities and Exchange Commission (SEC) this week filed securities charges against America’s biggest cryptocurrency exchange, they were premised on a single core idea: that U.S. law already includes the necessary tools to regulate cryptocurrency assets and marketplaces. Gensler, an appointee of the Biden administration, has consistently repeated that crypto doesn’t need new rules.
But legislators from both the House and Senate, and belonging to both political parties, seem to disagree. A series of recent bills show the legislative branch actively engaged in lawmaking around crypto – they clearly don’t agree that the status quo is good enough. According to one legal theory based on a law known as the Administrative Procedures Act (APA), the existence of this process could undermine the SEC’s current round of enforcement actions, particularly the case against Coinbase.
From an article at coindesk dot com:
The New Crypto Bill Gary Gensler Doesn’t Want You to Know About
“1. Profits are generated via the efforts of others. This is True. Users are key.”
Well a key point here is that profits can be generated by your effort as well as by others, it’s not solely down to dfinity or other teams to increase the value of ICP. This is different say to having a share in Apple, there is nothing you can create do to drive the apple share price up. On ICP you can build an app and generate profit and help the performance go the token.
I acknowledge you can sell an app on apple App Store and help the share price, but this requires approval from Apple so they are still in control there.
Well actually ICP is NOT a security until a Judge says so. It is only allegedly. Huge difference so until that gets cleared we focus on what is next and that is the ETH integration. As one can see nothing changed except the small drop in price that is happening to all Crypto market. You can still buy ICP on many exchanges, you can stake, vote and earn and you can convert to Cycles to fuel your dApp on the IC.
ICP is not a security in the USA until a Judge says so.
Although this is true the money you generate from a Dapp will come from its users. Even if you generate a large portion with ads users are needed to view your ads. So without a user spending their time and resources within said Dapp the developer will not make profit. Thus when viewed at the core of where the funds originate USERS are the key point therefore the conditions under criteria 4 have been met,
Sorry I read that another way maybe I’m wrong, but doesn’t “profits generated from others” mean that token holders get profit for the efforts of the company issuing them?
Yes, it can also mean that, but the key point of “others” within the definition of the Howey statement refers to any person other than the investor making the transaction. So although it includes the company in question and those within it others can refer to people outside the company as well.
It’s OHIO what did you expect …
… always has been …