Coin Center’s Security Framework Updated For Crypto

Coin Center, which is basically a blockchain advocacy group, has long iterated its belief that some digital assents look exactly like securities by law. With that, it suggests that cryptocurrencies must be regulated as such.

Cryptocurrencies Are Like Securities

The organization’s very own director of research Peter Van Valkenburgh published a new report, suggesting that certain digital currencies follow the oft-cited Howey Test. More importantly, they seem to act like investment contracts. For Van Valkenburgh, this comparison is enough to prove that cryptocurrencies should be treated as securities.

The report published by the director essentially updates the 2016 version. The latter simply detailed a possible framework designed specifically for regulators. It is basically meant to determine whether any given digital assets must be, in one way or another, deemed a security as per the Howey Test.

Detailing The Framework

By essence, the aforementioned framework examines at least three variables. These variables, according to Van Valkenburgh, are significant in determining if whether or not a cryptocurrency is a security. The variables are namely, distribution, decentralization, and functionality. To put it simply, it details how a digital asset is first initially distributed and then decentralized its underlying network. From there, it moves towards what powers or rights each token holder has in determining whether it is a security.

The new version, in particular, is a lot different. Unlike its predecessor, it now closely examines initial coin offerings or ICOs. It is safe to say that, by definition, it can reflect the fundraising method’s spike in popularity last year. It is worth noting that ICOs managed to raise $46 million in 2016. The figure is believed to be a bit less than one-tenth of the more than $5 billion raised in the following year (2017). Moreover, the new version is capable of providing more in-depth explanations about alt-coins and how each of them can fit into the above-mentioned framework.

Van Valkenburgh further notes the rise in airdrops, including ERC-20 tokens. He said that some, most prominently Ethereum, is meant to “empower their users” in order to create further bespoke tokens “on top of the parent network.” New tokens come with minting and transmission and, as such, their use is both policed and described according to the consensus mechanism. It even includes the blockchain of the underlying network.