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Author Topic: SEC laws in the united states  (Read 2510 times)
mcdett
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November 27, 2011, 04:59:58 AM
 #1

on the train into work every day I've been reading about us sec law.  I currently have a basic understanding of the rules regarding creating and marketing a security.  my question is how could one sell a security on a market backed by btc.  if one owned $100 usd of btc given a market index they would be able to redeem their security for which ever currency they'd like to trade with (or btc).  something to the effect of a btc paper based mutual fund indexed on usd.

something like the above raises many interesting legal questions?
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Matthew N. Wright
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November 27, 2011, 05:01:03 AM
 #2

Short answer: You can't, because BTC Is not a legally recognized tender.

mcdett
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November 27, 2011, 05:03:18 AM
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Short answer: You can't, because BTC Is not a legally recognized tender.

I'm not so sure.  we can make securities on the trading price of gold.  as long as btc is not currency, and instead a commodity (think pork barrels) then maybe one could pull together a security on btc.
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November 27, 2011, 05:05:33 AM
 #4

Short answer: You can't, because BTC Is not a legally recognized tender.

I'm not so sure.  we can make securities on the trading price of gold.  as long as btc is not currency, and instead a commodity (think pork barrels) then maybe one could pull together a security on btc.


The only reason I am aware of that you'd be able to make a security on the trading price of something is if

A) The trading price was for a contract in a legal tender (which BTC is not)
B) If the traded commodity in question was a commonly registered commodity (which BTC is not)

I think it's a really cool idea though and I have been watching previous threads about this issue regarding possibly creating government bonds for bitcoin to enable them to be considered a legal commodity. This of course would require government backing.

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November 27, 2011, 05:13:30 AM
 #5

The only reason I am aware of that you'd be able to make a security on the trading price of something is if

A) The trading price was for a contract in a legal tender (which BTC is not)
B) If the traded commodity in question was a commonly registered commodity (which BTC is not)

I think it's a really cool idea though and I have been watching previous threads about this issue regarding possibly creating government bonds for bitcoin to enable them to be considered a legal commodity. This of course would require government backing.

then the question becomes 1) how do we help making btc a registered commodity?  2) or how do we help make btc a legal tender?

semi-official rulings on questions of this nature can be done with letters to the us sec.

I once took part of on a signed letter campaign involving the sco/microsoft/ibm/linux litigation in which a swore that my business used open-source software and would be effected by the courts ruling.

if we could organize a little and create a community official letter to the sec about 1) a legal tender 2) or a registered commodity

but my post implies the a & b are what is needed, witch I'm not sold on... yet.  Is there some good reading you could pass on?
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November 27, 2011, 05:18:30 AM
 #6

1) how do we help making btc a registered commodity?

It probably would be defined as something entirely new or even a digital commodity/currency long before it would ever be considered an actual commodity as it is absolutely worthless on its face. The system of how it works is quite useful as a data exchange that we give a value, but in itself its not worth the electricity to hash it.

In my opinion this rules out the possibility of ever being registered as a commodity, but the good news is that is it by default already included as a 'stored value' and in some countries an 'online currency'. The bad news is, currencies are competitive as they fuel governments and no government will ever actively cooperate in the promotion of any currency other than their own.

2) or how do we help make btc a legal tender?
See above.


mcdett
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November 27, 2011, 05:27:29 AM
 #7

It probably would be defined as something entirely new or even a digital commodity/currency long before it would ever be considered an actual commodity as it is absolutely worthless on its face.

Not so sure.  one could measure the value based on computing power (read: energy consumption).  to say it is worthless misunderstand basic market principles occurring right now.  I've traded btc to buy a motorcycle and have mined many btc.  to say it has no value seems foreign to my life experience.
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November 27, 2011, 05:44:21 AM
 #8

It probably would be defined as something entirely new or even a digital commodity/currency long before it would ever be considered an actual commodity as it is absolutely worthless on its face.

Not so sure.  one could measure the value based on computing power (read: energy consumption).  to say it is worthless misunderstand basic market principles occurring right now.  I've traded btc to buy a motorcycle and have mined many btc.  to say it has no value seems foreign to my life experience.

It has no direct inherent value. I can trade socks for a motorcycle if someone is willing to do the trade, but that doesn't mean socks have any more or less value than to keep your feet warm and protected.

I use currently Bitcoin and KRW only. I also have absolutely no jobs outside of my bitcoin related duties. When I say bitcoin has no value, I am not speaking socially, politically or on a market or exchange. Those are all irrelevant. Gold has a use outside of our obsession with it. It conducts electricity quite well. Bitcoin is just a term for a long list of encrypted messages people send back and forth. It's a ledger, that's all it is. I believe in it's inherent value as being an encrypted ledger, I enjoy working towards making it work better, and above all else, I enjoy being open and honest about what it actually is and what it is not.

You can argue that bitcoin has a value as a ledger, but I can make my own fork for the same purpose as being a ledger. This would provide the exact same utility. So then you could argue that my ledge would have less network power behind it keeping it secure, and in that case you would be arguing that bitcoin's value is in its security to keep a history of messages intact. Although there is infinite potential for this, it is not a commodity by any means. It just makes it a very useful technology and even a public service.

Maybe that's where you should be going then. Argue that bitcoin is a public service.

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November 27, 2011, 08:17:49 AM
 #9

I believe in it's inherent value as being an encrypted ledger,

encrypted ledger?
Matthew N. Wright
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November 27, 2011, 04:43:03 PM
 #10

I believe in it's inherent value as being an encrypted ledger,

encrypted ledger?

I don't know why I worded it like that  Lips sealed

"Public ledger of pointers to encrypted signatures" would be more accurate, no?

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November 27, 2011, 08:37:20 PM
 #11

I believe in it's inherent value as being an encrypted ledger,

encrypted ledger?

I don't know why I worded it like that  Lips sealed

"Public ledger of pointers to encrypted signatures" would be more accurate, no?

Public key cryptographic signatures != encryption. I would say "Cryptographically signed public ledger" or "Digitaly-signed public ledger".

Encryption provides confidentiality (this is not the case with bitcoin, the transaction contents are visible).
Signatures provides authenticity, this is what the private keys/addresses are for.

Bitcoin: the only currency you can store directly into your brain.

What this planet needs is a good 0.0005 BTC US nickel.
Matthew N. Wright
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November 27, 2011, 08:57:18 PM
 #12

I believe in it's inherent value as being an encrypted ledger,

encrypted ledger?

I don't know why I worded it like that  Lips sealed

"Public ledger of pointers to encrypted signatures" would be more accurate, no?

Public key cryptographic signatures != encryption. I would say "Cryptographically signed public ledger" or "Digitaly-signed public ledger".

Encryption provides confidentiality (this is not the case with bitcoin, the transaction contents are visible).
Signatures provides authenticity, this is what the private keys/addresses are for.

Thanks for correcting that. ^^


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November 30, 2011, 03:59:58 PM
 #13

About legal tender: the notion entails a legal obligation to accept it as a merchant to extinguish a debt.
If bitcoins are not legal tender, they can still be accepted, optionnally, by the merchant, right ?

Matthew N. Wright
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November 30, 2011, 10:29:47 PM
 #14

About legal tender: the notion entails a legal obligation to accept it as a merchant to extinguish a debt.
If bitcoins are not legal tender, they can still be accepted, optionnally, by the merchant, right ?

That is correct sir. As for accepting it anyway, that in fact depends on the country/state laws but in South Korea and the USA at least, as a private retail business you're allowed to accept peanuts and jars of wolf piss for all they care, so long as you pay taxes on the capital gains. That is however a sure-fire way to get yourself audited by the NTS/IRS respectively.

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December 02, 2011, 03:18:08 AM
 #15

... so long as you pay taxes on the capital gains. That is however a sure-fire way to get yourself audited by the NTS/IRS respectively.

yes kids... make sure you pay the master [.5].  any btc you have at the end of the year in which its cost bases is lower then the current value, you owe uncle sam gains on that value.  us govt won't take btc for tax payment, so you'll have to have usd to pay that tax.  <-- don't hate on me for that, I'm just posting the law

the idea I'd like to address here is the following:

for btc to be represented through a securities contract would in fact btc need to be classified as:
1 - commodity (how does one "register" a commodity?)
or
2 - currency (this is my weak area, so I don't have much to say except... there may be greater pitfalls in this pursuit)

if not, could one simply create a btc backed securities contract by holding btc in some secure manner [1] for another party in exchange for usd?  In other words, Bob gives Sue 100 usd to hold 100 usd worth of btc at time of contract execution based on some agreed upon index [2], and a small fee.  When the contract ends (maybe at a set date, or redeemable to the holder) Sue gives Bob the original btc purchased at contract execution, for another small fee.  One is simply trading your secure storage methods [1] for something a person doesn't necessarily want to touch in exchange for a fee.

So... are 1 and 2 necessary and if not, what legal areas should one ponder about?

[.5] we do extract service value from the countries we live in, and these countries need to be paid to continue offering their services.  the efficiency and methods used in which these countries offer services, and receive payment should be debated in another thread... please
[1] secure manner - this is value provided in the contract.  this party would specialize in data storage and protection.  this organization would know how to protect  the private keys of the contract accounts in a way that was still accessible (maybe 2 days), but sure as shit can't be copied while in storage (think redundant media in insured bank safety deposit boxes (all in the contract of course))
[2] tradehill, mtgox etc.  the point is that it is an agreed upon source(s) for establishing value
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December 02, 2011, 07:35:12 AM
 #16

Short answer: You can't, because BTC Is not a legally recognized tender.

I'm not so sure.  we can make securities on the trading price of gold.  as long as btc is not currency, and instead a commodity (think pork barrels) then maybe one could pull together a security on btc.

I think you meant pork bellies. Don't matter! I once referred to a sock-puppet as a sock-pocket. Although I was corrected, the correcter knew what I meant.
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December 03, 2011, 04:59:27 AM
 #17


I'm not so sure.  we can make securities on the trading price of gold.  as long as btc is not currency, and instead a commodity (think pork barrels) then maybe one could pull together a security on btc.

I think you meant pork bellies. Don't matter! I once referred to a sock-puppet as a sock-pocket. Although I was corrected, the correcter knew what I meant.


you're right, I did mean that.  Thanks for pointing it out.
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December 03, 2011, 05:21:32 AM
 #18

... so long as you pay taxes on the capital gains. That is however a sure-fire way to get yourself audited by the NTS/IRS respectively.

yes kids... make sure you pay the master [.5].  any btc you have at the end of the year in which its cost bases is lower then the current value, you owe uncle sam gains on that value.  us govt won't take btc for tax payment, so you'll have to have usd to pay that tax.  <-- don't hate on me for that, I'm just posting the law

the idea I'd like to address here is the following:

for btc to be represented through a securities contract would in fact btc need to be classified as:
1 - commodity (how does one "register" a commodity?)
or
2 - currency (this is my weak area, so I don't have much to say except... there may be greater pitfalls in this pursuit)

if not, could one simply create a btc backed securities contract by holding btc in some secure manner [1] for another party in exchange for usd?  In other words, Bob gives Sue 100 usd to hold 100 usd worth of btc at time of contract execution based on some agreed upon index [2], and a small fee.  When the contract ends (maybe at a set date, or redeemable to the holder) Sue gives Bob the original btc purchased at contract execution, for another small fee.  One is simply trading your secure storage methods [1] for something a person doesn't necessarily want to touch in exchange for a fee.

So... are 1 and 2 necessary and if not, what legal areas should one ponder about?

[.5] we do extract service value from the countries we live in, and these countries need to be paid to continue offering their services.  the efficiency and methods used in which these countries offer services, and receive payment should be debated in another thread... please
[1] secure manner - this is value provided in the contract.  this party would specialize in data storage and protection.  this organization would know how to protect  the private keys of the contract accounts in a way that was still accessible (maybe 2 days), but sure as shit can't be copied while in storage (think redundant media in insured bank safety deposit boxes (all in the contract of course))
[2] tradehill, mtgox etc.  the point is that it is an agreed upon source(s) for establishing value

see above for question at hand.
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December 09, 2011, 03:56:42 AM
 #19

Tomorrow I have a meeting with a us sec licensed hedge fund manger.  I'm not going to mention btc to him, but what sort of questions could I ask that could help people out?  If you have a us sec question please let me know.  The purpose of the meeting is related to legal aspects of sec contracts; promises of insured securities and services provide around they're securitization.

... so long as you pay taxes on the capital gains. That is however a sure-fire way to get yourself audited by the NTS/IRS respectively.

yes kids... make sure you pay the master [.5].  any btc you have at the end of the year in which its cost bases is lower then the current value, you owe uncle sam gains on that value.  us govt won't take btc for tax payment, so you'll have to have usd to pay that tax.  <-- don't hate on me for that, I'm just posting the law

the idea I'd like to address here is the following:

for btc to be represented through a securities contract would in fact btc need to be classified as:
1 - commodity (how does one "register" a commodity?)
or
2 - currency (this is my weak area, so I don't have much to say except... there may be greater pitfalls in this pursuit)

if not, could one simply create a btc backed securities contract by holding btc in some secure manner [1] for another party in exchange for usd?  In other words, Bob gives Sue 100 usd to hold 100 usd worth of btc at time of contract execution based on some agreed upon index [2], and a small fee.  When the contract ends (maybe at a set date, or redeemable to the holder) Sue gives Bob the original btc purchased at contract execution, for another small fee.  One is simply trading your secure storage methods [1] for something a person doesn't necessarily want to touch in exchange for a fee.

So... are 1 and 2 necessary and if not, what legal areas should one ponder about?

[.5] we do extract service value from the countries we live in, and these countries need to be paid to continue offering their services.  the efficiency and methods used in which these countries offer services, and receive payment should be debated in another thread... please
[1] secure manner - this is value provided in the contract.  this party would specialize in data storage and protection.  this organization would know how to protect  the private keys of the contract accounts in a way that was still accessible (maybe 2 days), but sure as shit can't be copied while in storage (think redundant media in insured bank safety deposit boxes (all in the contract of course))
[2] tradehill, mtgox etc.  the point is that it is an agreed upon source(s) for establishing value

see above for question at hand.
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December 25, 2011, 03:58:10 AM
 #20

Tomorrow I have a meeting with a us sec licensed hedge fund manger.  I'm not going to mention btc to him,

how did that go?
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