A Security is a Security is a Security

16th October, 2018

They must be OLD fans of Gertrude Stein. A security is a security is a security… from the SEC’s point of view. The way the crypto market publicly talks about security tokens or STOs, that’s the catch cry. You can be forgiven for imagining a population of tokens or coins that are either securities under the SEC’s rules, or not regulated at all.

Behind the scenes, there’s a lot more analysis going on.

The history: after the 1929 Wall Street crash, US legislators created the ’33 Act and the ’34 Act, defining Securities. In 1936 they passed the Commodity Exchange Act, defining a Commodity and futures. Fast forward to 2009, when Dodd Frank broadened out those Acts to apply to unlisted derivatives. In 2009 the G20 Ministers got together in Pittsburgh and rolled out a fairly uniform regime for unlisted derivatives across the globe. The G20 did not streamline the broader securities rules across countries. They were scared about another Lehman or AIG, focusing on unlisted derivatives with a security or commodity base.

Nowadays with tokens you therefore need your lawyers to scroll through the older securities and derivatives laws, the pre 2009 laws. Those older laws focus on the point of view of the investor and how the product features perform, regardless of form and disclaimers.

Next week we will list those laws – see you next Friday.

In the meantime check out the Russian Civil Code, to see how smart our friends the Russian crypto lawyers are to interpret old school law to our new technologies:

Article 142. The Security
1. The security shall be a document, confirming, with the observance of the established form and obligatory requisites, the property rights, whose exercising or transfer shall be possible only upon its presentation…
[DCH annotation: BEARER SECURITIES CONCEPT]

Article 143. The Kinds of Securities
To the securities shall be referred: the government bond, the bond, the promissory note, the cheque, the deposit and the savings certificates, the savings-bank book to bearer, the bill of lading, the share, the privatization securities and also the other documents, which have been referred to the securities by the laws on the securities or in conformity with the order, established by these laws.
[DCH annotation: OLD BANKING INSTRUMENTS]