There are both pros and cons to the debate considering whether Tokens are security or otherwise. The more pertinent question is the acceptability of Crypto ecosystem by governments across the globe. Many governments are gung-ho on Cryptocurrency but an equal number of countries are sceptical about its possible threat to existing institutionally validated monetary system.
Any change brings with it new dimensions to the fore that were otherwise thought to be a non-issue. This new perspective may make sense to many or seem irrational to others. However, if the change has a potential it will manifest itself in one form or the other. The changing dynamics usually takes time but it eventually starts to find traction with the masses and society in general.
Crypto ecosystem is certainly the most disrupting technology. The elimination on intermediary and decentralization lies at the heart of Crypto world. These features open the window to a plethora of dimensions which has the capacity to overhaul the entire way the society functions and institutions work .
As per the definition of security by the US a security is ‘’ an investment of money in a common enterprise with the reasonable expectation of profits to be desired from entrepreneurial or managerial efforts of others”
The Crypto tokens clearly doesn’t dovetail with the given definition . However, consider that the given definition was created long before Cryptocurrency came into existence. Therefore to bring tokens under the ambit of security the definition of security has to be reformed which is a far-fetched idea.
Now let’s assume either the Judiciary or SEC/CFTC in coming future considering the astronomical amount of stakes involved, choose to exercise its discretionary powers and declare Crypto Tokens as security or otherwise what will be the fallout and ramification, and is debate worthy according to Sam Taber
In case Crypto tokens are considered security it will mean legal validity by government agencies. This will do away with the dilemma of uncertainty which is ingrained in Crypto ecosystem. Investors will find themselves more confident because of the legal status being assigned to it. More investor and trader will be attracted to try their luck in Cryptocurrency. This will increase the traffic and cryptocurrency will demonstrate an unprecedented surge in its value thereby creating millionaires and billionaires
On the other hand, the decentralization proposition which is the USP of blockchain based technology might take a beating. Once Crypto’s are considered security it will have to comply with strictures pertaining to a security instrument. A window of new challenges will open that will have to be tackled judiciously.
The cryptocurrency thus will be subjected to government regulated tax treatment as well as other forms of regulation. The investor may have to furnish his details before investing. (The KYC) know your customer norms will have to be adhered to.
This will defeat one of the significant factors why people are investing in Cryptocurrency . There are hordes of individuals who don’t want to allow their financial status to be known to the government institution. Such investors will shy away from cryptocurrency leading to a sharp decline in the value of cryptocurrency across the spectrum.
But in any case, if Tokens are not assigned to be a security it will have its own ramification. The business will continue to flourish as is the case. The anonymity of the investor will always remain private. There will be no government interference. The investor would not have to be threatened by a rogue bureaucracy which may otherwise become a constant source of scourage and nagging worry.
However, there will always be a looming danger of government making imposing restriction on cryptocurrency or making it null and void. In that case, both institutional and retail investor will suffer massive losses,a condition that one wants to avoid at all cost.
Hence declaring Crypto Tokens as security cuts both ways. In the meantime, a consensual meaningful public discourse on the issue is a must and inevitable.
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