EtherDelta and Crypto Exchange Regulation: Day Two
November 09 2018 - 12:32PM
InvestorsHub NewsWire
Bitcoin Global News (BGN)
November 09, 2018 -- ADVFN Crypto NewsWire -- Yesterday, we
shared the news with you that EtherDelta was charged with being an
unregistered securities exchange, chiefly due to the SEC
determining that some of its hosted Crypto assets were clearly
securities. Now, a day later, Coindesk has already reported that
more crackdowns on Crypto exchanges may be on the way, according to
insider sources.
With this, logical questions to
raise include: who are these sources and if this is true, what
platform might be next to fall?
As to the first question
here, Coindesk’s primary source that has most directly influenced
their report on the subject is Andrew Hinkes, a law professor at
New York University. In today’s article, he is quoted as suggesting
that facilitating the exchange of crypto assets is most likely
being treated the same as facilitating the exchange of securities.
Therefore, if we take this to be true, we can then say that
unregulated Crypto exchanges are violating securities laws. Central
to this possibility is the fact that regulators have been using the
Howey Test since about 1946, to determine whether an investment
product is or is not a security. In fact, if we take the 2017 DAO
hack as our primary example here, we can also conclude that the
Howey Test is now being applied to Cryptocurrencies as
well.
In remembering what the Howey Test
is, it may be easier to apply this logic to a decision like
yesterday’s charges against EtherDelta. Because of how it has been
applied over time, this test has been distilled into three main
criteria for whether or not something constitutes a security.
First, if it is clear that profits are promised from the
undertaking, then it is a security. Second, if the investment is
made in one clear business of some kind, it can be defined in the
same way. Third, if it can be proven that something was an
investment of traditional assets, then it is a security.
Moving forward, it would not be
amiss for the average Blockchain investor to apply the Howey Test
in determining whether or not a cryptocurrency is safe to invest
in.
By: BGN Editorial Staff
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