That seems to be the case for US media... here in Germany, it's a bit different at least for quality media. Spiegel, Heise, Die ZEIT and T-Online all happily link to sources, even up to competing news media.
thesmokinggun.com already does provide a fine repository of current and past court filings of interest. They've been around for years, and some journalists do link to them. Intriguingly, the one ad on their site at the moment is for diamond engagement rings.
I suppose that ad's positioning could be just random programmatic placement. But if anyone in the HN community can figure out why court-filing enthusiasts are especially likely to want to buy an engagement ring off an unverified website, I'd love to know more
I like that idea. A homepage that lists the top 20 stories of the day that are about a document that probably isn't actually linked to. Go to our site (www.readtheactualdocument.com) to see it -- and get served ads.
Additive would be some highlighting and annotating of the document (as nytimes sometimes does) to point people to salient points.
Let's say I run a swap meet for people to buy and sell Pokémon cards. There are lots of scammers out there, but I promise people they are going to get good prices. And I even offer to buy cards off of people at good prices to drum up interest.
Tomorrow, the SEC decides that Pokémon cards are securities (far-fetched, but work with me here) Suddenly, anyone buying and selling them becomes a criminal. I tell people via text message "pish-posh - there's no way the SEC could enforce this". But people stop coming so I promise them that I can buy up all of their cards anyway. Especially the cards that complete my collection.
Then it gets enforced. Not only did I trade in illegal assets, I am now guilty of fraud for telling people it was safe. I am also guilty of market manipulation! And on top of it, I did it via text message so it's now wire fraud to boot.
As far as I understand reading the charges, this is mostly what he is guilty of. This is a bit different than the "true" type-1 frauds that exist in crypto - the blatant pump and dump schemes, et al. In fact, I would feel safe to say there might have been no fraud without the SEC classification. (EDIT: Ignore this since they also did a lot of legitimate fraud too)
Regardless, the writing is on the wall for crypto. I could not even fathom why you would want to be holding onto even Bitcoin or Ether right now.
I think the way to understand this is that the SEC is concerned about protecting unsophisticated regular folks from being scammed.
If you started aggressively marketing your Pokemon cards, presenting them as financially sound investments, and regular people started putting their entire pension savings into them lured by false promises and being scammed, then the SEC might well take an interest in Pokemon cards as well.
In short, what qualifies as a "security" and becomes subject to regulation is fluid and endogenous. As soon it starts involving real wealth for regular folks, chances are it will be deemed subject to regulation.
> I think the way to understand this is that the SEC is concerned about protecting unsophisticated regular folks from being scammed.
Keep in mind, the people the SEC are focused on "making whole" are the investors. The actual "unsophisticated investors" who make up the bulk of Celcius's customer base are going to get next to nothing out of the settlement. However, the sophisticated institutional investors who invested directly into Celsius will get most of their money back.
It would actually be a completely different legal case if they just said "Celcius misrepresented the security of their assets". In your Pokémon example where I am scamming people, they could bust me for fraud without having to reclassify all cards everywhere. But that's not the case they are making here.
The SEC is not focused on making the "institutional investors" whole. That is happening in bankruptcy court, because Celsius declared bankruptcy, and that is how bankruptcies work: the senior creditors get their money back first. If you have problems with that, take it up with the bankruptcy court and U.S. bankruptcy laws that classify customers as junior creditors.
In fact, the SEC does not ever get involved in "making investors whole." It leaves that part up to the investors themselves.
The SEC's complaint seeks to bar Mashinsky from future involvement in crypto trading, to bar him from being an officer or director of a publicly traded company, and for the disgorgement of profits arising from maintaining the price of crypto tokens through market manipulation tactics. [https://www.sec.gov/news/press-release/2023-133]
Also, in your Pokemon example you claim that buying up Pokemon that completes your collection somehow constitutes market manipulation. But that's a thing collectors actually do...so...by definition not market manipulation but a fundamental part of the market for collectibles (and in the Pokemon hypo Pokemons have instrinsic value because they can be used and valued in a Pokemon game independently of their trading value, in addition to their trading fair market value based on their rarity as a collectible item). This is very different from what the Celsisus guy did; he used wash trading to artificially increase the price of a crypto token whose only value was in being traded.
So...the SEC didn't try to make you whole...it recovered about a third of the money you lost to the Ponzi scheme through a disgorgement order.
The SEC can order disgorgement of profits from an investment scam (which are then returned to victims to the extent such profits are recoverable), but making victims whole for their losses is a very different thing.
The point of the receivership was to recover the money for creditors, not investors. Investors are quite literally the last people who get a recovery from a receivership.
I'm not going to keep arguing with a non-lawyer about something I've been involved with as a lawyer, so this will be my last comment on the matter.
While you are correct in the general sense, court-ordered receiverships due to SEC enforcement action are very much about recovering investor money in a fraud situation.
It was a pretty good scam. The scammer had a company that sold fractional profit shares in oil wells. Without getting too deep in the weeds, he sold the equivalent of more than 100%. He invested the proceeds of new investment in paying out old investors and buying new oil wells.
Eventually he ran out of new investor money and the scheme unraveled.
I don’t know how I would have caught it. The regulatory oversight in oil well finances is poor.
The guy was on the lam for a few months, then sentenced to 10 years in Federal prison. He then escaped and hasn’t been found.
Matt Cox talked his way out of imminent arrest, went on the run for 3 years, and was only discovered after his girlfriend slipped up and told something to the wrong person.
> For example I don't see the SEC going after Kilolo Kijakazi, who is actively scamming working adults under 40 every day.
Why would they? How is your social security contribution a fungible, tradable asset?
And agree or not, she's following government administration policy (which still may not survive legal challenge, but that's separate to 'securities fraud').
You may be aware already, but if you replace Pokemon with Magic the Gathering cards this actually becomes almost unbelievably close to a true story (minus the SEC story arc). The first "huge" bitcoin exchange[0] was originally a Magic card exchange which got extended to support cryptocurrencies. "Mt. Gox" = "Magic the Gathering online exchange". If it hadn't been hacked it would likely be in Coinbase's shoes right now and then your hypothetical would truly be eerily accurate. But of course it was hacked, it was a trading card exchange dealing in cryptocurrencies -- a major hack was basically inevitable.
Mtgox was not run very professionally, so I doubt they would have lasted this long. I had to deal with them on IRC to get my money out. I was told that the person with the keys to get my withdrawal was “in the bathtub”. This was on the last day or so before everything was shut down and during the actual crisis, mind you.
As an old coworker of mine said when MtGox imploded due to fraud and/or just abysmal security, “What? Don’t you do all your banking at the comic book shop?”
It would never have ended up in Coinbase's shoes. The founder is a notoriously bad programmer and business leader.
Even if he wasn't hacked he would've gone bankrupt because of his failing market manipulation bot that was making loss despite having full info to an exchange in the most over heated market of the past 50 years.
I don't think even A16Z would burn their money on MtGox.
This is a truly insane apologia for a firm which marketed a banking-like product with risk-free returns of up to 17%.
> Mashinsky explained that Celsius's rates were so much higher than bank deposit rates not because it was riskier than a bank, but because it passed along more of its earnings to customers. “Somebody is lying,” said Mashinsky: “Either the bank is lying or Celsius is lying.”
The physical collectibles market is over a century old for baseball cards. So far the SEC hasn't stepped in for places trading baseball cards, magic cards, pokemon cards, sneakers, etc.
So the burden of proof seems to be on the claim that they're the same, or that it's a meaningful analogy.
But hey, let's look at the this case - the accused did the following:
* created their own token (ok, so they aren't just a card swap meet or trading site like your analogy)
* pumped and dumped that token
* paid ridiculous interest rates (I sure haven't seen that from the places I get my Pokemon cards...) and advertised that the principal was safe (these are wildly mutually contradictory, and many people knew it at the time)
* lent money...
ok let's stop there, we're already clearly in a different universe of financial activity.
To be clear, I think Celsius committed actual fraud. I just want to talk about one particular point here.
> So the burden of proof seems to be on the claim that they're the same, or that it's a meaningful analogy.
I have a pair of “Dear Summer” Off-White x Nike Dunk Lows, the last collection released while Virgil Abloh was alive. The SNKRs (Nike) app randomly selected active users for the chance to purchase them; necessary, because they were guaranteed to sell out instantly. At the time of purchase nobody had any clue what the shoes would look like, nor which "n of 50" colorway they would get. We were presented with a picture of the shoebox, a size selection, a buy button, and a countdown timer. However, it's not far off to say that despite this, every single person (remember, only active users got this notification) that initially purchased the shoe did so knowing there was absolutely no chance that a limited edition Off-White/Virgil Abloh/Nike shoe would sell for less than a 100%+ premium over retail on the aftermarket. Completely risk-free, assuming $180 wouldn't hurt your pockets in the near term.
Under the SEC's reading of the Howey Test that omits the word "solely," the purchase of these shoes constitute
1. An investment of money (check)
2. In a common enterprise (check. Let's be honest, the majority of pairs sold hit the resell market immediately. Forman, 421 U.S. at 852-53 may not be applicable.)
3. With the expectation of profit (check, check, check) to be derived from the efforts of others (the ongoing reputation and marketing efforts of everyone involved),
making them unregistered securities.
Naturally, this means Nike has to "come in and register," for every limited supply drop, StockX and GOAT have to register as securities exchanges, and only accredited investors are allowed to purchase at retail. Anything else is clearly a violation of The Law.
All of this is perfectly reasonable because, "the law is clear, we’re obligated…to enforce the law as Congress passed it and how the courts interpret it," as Chair Gensler put it.
I'm probably not exactly reading the terms precisely how Congress intended or how any particular SEC agent or court might but the advertising and messaging all seems very different from anything in crypto outside of NFTs. There's no pitch of using these sneakers to make transactions, or a "sneaker savings account". The "be one of the only people to get this thing" core principle seems distinct. Yes, there's a resale market for that thing - first sale doctrine basically means they COULDN'T try to remove that, ya? - but how much is that their "fault" per se? To me this fails (2) or (3) for shoes (or Pokemon cards or what have you).
E.g. if we interpreted the test like that, wouldn't we end up with nearly any "limited run" product being a security? And that's never how the law has been interpreted or enforced, and certainly can't have been the intention.
So I'm unconvinced by the lay reading of the law of folks saying "this makes sneakers a security too" since it seems no more valid than a lay reading that doesn't and there's been no official indication that sneakers or trading cards are getting anything like the attention crypto did from regulators, despite being much older markets.
Except there actually are people who really do want the shoes not for resale. And that is a legitimate driver of value and it is a very limited market.
The SEC has argued in some crypto cases that even if just a few token holders buy for profit instead of for utility, the token is still a security. Of course that’s wrong, but it is the SEC official position.
2) and 3) don't seem to actually apply to sneakers here:
2) I've used the app before, the fact that someone else and I both want these sneakers doesn't make our purchase of a pair each a "common enterprise".
3) I didn't expect profit, and buying a thing which can be resold for profit doesn't mean every purchase of it was an expectation. All my sneakers are worn.
The buyer expects to derive profits from arbitrage to the existing market value. If Nike shut down the moment you bought the shoes the profits would still be realized, because they don't require any effort on Nike's part.
Uhhh, two brief examples of fraud:
Celsius said they had insurance to cover deposits - they did not.
Celsius said customer funds are not used for high-risk loans -- they were.
I think the normalization of criminal activity in the crypto space is largely due to regulatory ignorance but when there are clear cut cases of fraud, the SEC should aggressively prosecute these crooks.
The writing would definitely be on the wall if the SEC got to make the final decision. But they don't, and they just had a big loss in court with the XRP case. If XRP isn't a security, then most other things traded on exchanges aren't securities either.
Broader question: Given that SEC enforcement is speculative (eg: we think this might be a security) do they have to pay damages when they're wrong? If not, why? If so, how much?
That conclusion is an assumption of an assumption of an assumption.
First of all, SEC enforcement is both civil and regulatory. The SEC is an independent federal agency. Since it is not a member of a federal executive department it has no criminal enforcement capability. All matters of criminal conduct are forwarded to the Justice Department.
Secondly, SEC enforcement is not speculative. They can seize assets just the same as the Justice Department as a matter of regulatory enforcement and they do so regularly. SEC enforcement agents specialize in securities law which is a legal specialty.
Third, the law is unclear whether crypto, crypto exchanges, and transactions therein qualify as securities. If this activity were to become illegal tomorrow then that becomes a matter for the Justice Department to enforce, not the SEC.
Source: I have relations to a famous (in securities enforcement world) former SEC enforcer.
It looks a bit more nuanced than that. Torres is the judge in the XRP case. From the article:
——-
Torres, who is based in New York, on Thursday said the company's $728.9 million of XRP sales to hedge funds and other sophisticated buyers amounted to unregistered sales of securities.
But Torres ruled that Ripple's XRP sales on public cryptocurrency exchanges were not offers of securities under the law, because purchasers did not have a reasonable expectation of profit tied to Ripple's efforts.
Those sales were "blind bid/ask transactions," she said, in which the buyers "could not have known if their payments of money went to Ripple, or any other seller of XRP."
——-
So it seems XRP was deemed a security just the sales on public exchanges weren’t a securities offering? A bit confusing IMO.
From reading over the decision, the judge emphasizes that a security is an investment contract. The institutional investors and Ripple formed a contract, in which the investors were promised that Ripple would do various things in exchange for the investment.
On the secondary markets, people were just speculating on the token price going up or down. They weren't getting any promises from Ripple, or even necessarily giving money to Ripple, so there was no contract. If there's no contract, there's no security. Just speculating on the price of something doesn't turn that thing into a security.
I don’t think it’s clear from that case that XRP is not a security - “The SEC won a partial victory as Torres found the company's $728.9 million of XRP sales to hedge funds and other sophisticated buyers amounted to unregistered sales of securities.”
It seems more that selling it on exchanges was not a violation of the law, but some of the activities around it still were.
(Edit - in fact it may not even be that, according to a footnote - "The court does not address whether secondary market sales of XRP constitute offers and sales of investment contracts because that question is not properly before the court." - so it looks like ripple aren't in trouble for selling XRP on exchanges, but that doesn't necessarily mean the exchanges aren't in trouble for it)
Conclusion of section 2: "the Court concludes that Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts."
If it's not an investment contract, it's not a security. That's one of the major points of the whole decision. Section 1 details ways that sales to institutional buyers did involve a contract.
The footnote just says the decision does not directly address exchanges. But it's hard to see how the arguments in section 2 wouldn't apply to exchanges just as well.
Sure - The point is it’s not as simple as “w00t Ripple won it’s not a security”, as the conduct of exchanges with respect to the token was explicitly not examined.
In order for your analogy to hold, you can’t forget about the part where you constantly push the idea that trading Pokémon cards is a better way to make money than banking, manipulating the prices of cards and lying about how the cards are priced.
Guys like Mashinsky bad-mouthed banking nonstop and touted their exchanges as more equitable platforms to store and make money.
> Tomorrow, the SEC decides that Pokémon cards are securities (far-fetched, but work with me here)
There’s a little bit of rhetorical sleight of hand here. It’s far fetched because the analogy isn’t actually very good. This isn’t hand waving a minor problem- why the SEC is calling crypto securities and not pokemon cards is the right at the heart of the issue.
As others have pointed out this analogy is kind of bad. But… also you seem to clearly acknowledge within the hypothetical that performing an action would be a crime, and then do the action. And then you’re upset because it wouldn’t have been a crime if it hadn’t been made a crime… but it was and you knew that and you did it anyway.
Yeah, these analogies are always terrible, but this one actually includes the "hey they ruled it was a crime and I decided that was bullshit and kept criming" part.
The SEC doesn't bring criminal charges. The SEC pursues civil action. The SEC tries to hold people liable for the damages they cause, and the bar here is relatively low—a preponderance of evidence (more likely than not) is all that's needed.
If they suspect something is criminal they will then recommend that the Justice Department seek criminal charges. Different legal case, and this has a much higher bar.
Reporting on the SEC often gets mixed up and convoluted. You read about the SEC "charges" and a not guilty criminal plea, but these are actually two separate legal cases happening simultaneously. This is the way it usually happens, since the SEC is unlikely to "enforce" the law (since they can't) unless they can get the Justice Department to bring charges. It's much easier to pursue civil litigation and hold people responsible if you can get a criminal conviction.
If you are facing a criminal trial for fraud there is likely substantial evidence that doesn't fully come through in the reporting. Criminal charges like this don't actually happen that often, which is why the SEC is said to be toothless. They only really pursue if they think they can get the Justice Department onboard AND they can get a criminal conviction. Yeah, yeah, innocent until proven guilty and all that… but if you are facing allegations from both the SEC and the Justice Department you've probably done something pretty heinous.
> Suddenly, anyone buying and selling them becomes a criminal.
No, people buy and sell securities all the time. You simply need to follow the regulations for handling securities which includes certain types of tax and risk effort.
If you keep selling securities while not following the KYC and tax stuff for those securities, you will in fact be breaking the law.
Nor did the SEC magically throw down one day and start calling crypto a security. It is plainly and obviously a security _and has always been one_.
The regulations for handling securities are through a brokerage. This is a HUGE deal because handling crypto through a brokerage would basically neuter it.
Imagine trying to buy a pizza with Bitcoin, but you have to go into your Charles Schwab account and wait 3 days for the Bitcoin transaction to settle. In a brokerage system you would get the ownership stake aspect of crypto, but none of the transactional ones.
The settlement time on stocks is minutes. There is no requirement that brokerages are slow to settle. That is your brokerage choosing to be risk adverse.
Imagine, for a moment, that I'm a literalist. Which exact part of the constitution prohibits them?
> The government should not be able to force private companies to do the work of LEA.
Good thing they aren't tasked with the work of an LEA, they simply have an obligation to report what they know.
But even if they were, there's nothing that precludes the government from conscripting people for service to the state (The draft). Or from empowering third-parties with LEA-like powers (Bounty hunters, for example).
Are those also prohibited by the constitution? Which part of it?
> The court sided with the SEC when it came to “Ripple’s Institutional Sales of XRP to sophisticated individuals and entities,” saying they were securities transactions and constituted an investment of money. Ripple won when it came to “programmatic” sales, however, or sales made through trading algorithms, as well as other distributions.
Which stands to reason. Doing an ICO and promising to issue a token is a pretty clear securities transaction, but that doesn't mean that the token itself is a security.
This was the view of William Hinman of the SEC, in 2018: "the token – or coin or whatever the digital information packet is called – all by itself is not a security, just as the orange groves in Howey were not."
If anything, holding bitcoin (with self custody) protects you from this sort of thing because there's no counter party risk. From that standpoint, holding bitcoin does not have counter party risk, unlike holding gold or equities in an online account.
Crypto assets are illegal if you try to dodge taxes. Or, as a trading institution, pretend that you have no duty to follow tax laws on reporting client transactions. They're no different than equities if you follow all the laws.
This all seems weird to me in Canada. Here, it's been acknowledged for years that crypto = equities.
That's more true for bitcoin than for some other projects, but even bitcoin has the Lightning Network which they're attempting to use for payments using BTC.
Playing Devil's Advocate - The Pokémon card is a thing. I'm not buying it because I think it is a fungible asset that I can use to transact with (the thing I bought has a physical condition that can be graded, it is unique).
No one was collecting crypto to complete their collection, they were buying crypto (not caring even a little bit about which particular unique token they bought) because they thought it would be a useful tool in future monetary transactions.
The real crime here is US regulators thinking "commodities" was a fix-all solution for regulating crypto when you can eat most commodities, but not crypto (since again, If I buy orange juice futures from someone, they can't deliver me any oranges, they need to be edible and of a certain grade).
Now regulators have come to their senses, but in a really confusing and unfair way TBH.
People aren't buying Pokémon cards to "complete their collection": they are buying them because they think someone else will pay more for them later, presumably because they want to "complete their collection", but that makes just as little sense... they too will be buying it from the first person in order to sell it to a third person. There is supposedly a game attached to Pokémon cards, but that excuse to establish "utility" is pretty flimsy: even the 10 year old I know who is obsessed with these cards is only in it as an amateur investor and it isn't clear to me he even knows the results; he's simply fallen for the marketing efforts of this company shilling their shitcards on an unsuspecting populace, many of whom will lose thousands of dollars by the time this particular collectible bubble is over.
> There is supposedly a game attached to Pokémon cards, but that excuse to establish "utility" is pretty flimsy
Playing the game is a game. (There are dozens of major tournaments, including national and world championships, of people playing the game.) Collecting the cards is also, in a different way, a game. They have made a product that people do things with. You are essentially trying to define all products with resale value as securities.
I am just drawing an analogy to the same BS arguments that the SEC--and the anti-crypto crowd on this forum--like to make against projects like Filecoin.
Why do you then believe that cryptocurrencies are somehow different? How about Axie Infinity, which is specifically a game similar to Pokémon cards?
Why is it somehow sufficient for Pokémon cards to say "a game is a game" but you say that for crypto and you are "shilling your shitcoin"?
Do you believe this to be different for baseball cards, which do not have a game, or for competing collectible card games which never got popular?
(After all, if you are willing to say that just wanting to collect and trade cards for purposes of making money is itself a game that establishes utility, what are you even trying to regulate in the first place? Aren't you then just making all securities into products?)
> After all, if you are willing to say that just wanting to collect and trade cards for purposes of making money is itself a game
Making money is not the reason that people collect and trade Pokemon cards, and if you think it is then your brain has been pretty badly poisoned by activities where making money is the only objective.
If you really look deep down into crypto, its really just Uber or Airbnb skirting the law with technical, and often mental loopholes. You need a license to drive taxi or rent out your place. But NO i'm just sharing my ride or i'm just sharing my house, no taxi/renting going on here! At the end of the day you are offering the same service that is regulated, calling it something else can only get you so far until you pay all the politicians off. The real issue here is crypto paid off the wrong people.
> Tomorrow, the SEC decides that [whatever] are securities
That's not really the way this works. "Security" is defined by law, not by the SEC. Existing stock markets and other trading entities have existing regulatory relationships with the SEC, but the SEC's enforcement powers aren't remotely limited just to the NYSE et. al. The question is why Celsius thought they didn't need to follow securities regulation, given their business.
Because, and let's be honest here, crypto coins and assets are really just obviously securities by any reasonable interpretation. They're abstract tokens of ownership, they're liquid, they're traded with others in the same kind of way (via an exchange intermediary), and for the same reasons (investment).[1]
Clearly this was the way things were going to shake out. Could the SEC have been clearer? Surely. But to pretend that Celsius couldn't have seen this coming is ridiculous.
[1] FWIW: note that trading cards and other collectibles fail most of these tests. While sometimes you buy them for investment or on exchanges, they remain primarily physical devices providing a means to play a game.
So yes, if finance were unregulated, then he wouldn't have been violating the securities regulations that didn't exist. But they did exist, and the Howey Test is from 1946, so it shouldn't have been a surprise. A lot of people tried to pretend that the existing financial regulations, many of which were created in response to previous scams, didn't exist. Or at least didn't apply to them.
Was this intentional fraud from the start? Or was it more like the sort of Ponzi scheme where some yutz starts off a business in hope, makes big promises, fudges the books a little, and then just gets in deeper and deeper? It's a good question for philosophers and spectators, but personally I don't care at all. And I doubt federal prosecutors care much either.
I have zero sympathy for any of these people. "Move fast and break things" is a dubious ethos even when for something as trivial as a website to post selfies. But when you apply it to the foundations of our vigorously financialized capitalist economy, it's about as smart as applying it to submarine design.
> It's a good question for philosophers and spectators, but personally I don't care at all
Please don't be so narrow sighted. Have you ever been charged with a crime you didn't know was a crime? You don't think overzealous sheriffs or prosecutors love pulling out old statutes on people?
Holding people accountable for laws they had no reasonable way of knowing is a miscarriage of justice. Our criminal system absolutely takes intent into account when determining criminality and sentencing.
I have no idea why people think the Howey test is so cut and dry when courts sometimes struggle with a legal definition for a sandwich.
"Ignorance of the law is not an excuse" is a well-established legal principle with precedent going back to Ancient Rome. It does get a bit tricky when regulatory statutes get involved, but c'mon: all these businesses save maybe Coinbase are run by criminals. We're not talking about well-meaning people acting in good faith here.
Also, that all only applies to criminal statues, not civil/regulatory ones. If you're a construction firm who doesn't know that houses have to be built to fire code, maybe you'll escape criminal prosecution, but the government is going to take an axe to your business anyway.
Mashinsky definitely has a "reasonable way of knowing" about these laws. More than that, anybody starting a company has a positive duty to clients and investors to make sure that it's legal before things get too far.
Maybe a better example would be the pot industry. Pot is blatantly illegal at the federal level. So everyone currently running a dispensary is theoretically operating fraudulently with their business partners.
Does that mean they have a duty to their own business partners or customers or investors to shut down their own business?
They are not operating fraudulently. Their customers are buying and getting marijuana. Their investors surely know the risks as well.
If we're looking for an analogy in this space, I think it's more like snake oil. So imagine a company started selling a new "nutritional supplement" or "herbal blend" that helped with anxiety. But it turned out the secret ingredient was weed. That would be a fraud on investors and they could well get charged for that on top of the base drug charges.
I think people running billion dollar companies with the ability to access effectively unlimited lawyers in an industry with constant news coverage in major papers about how it is dubiously legal while writing to the agency in charge don't get to use the "how was I supposed to know about an obscure law from 1841" excuse.
Courts never struggled with the legal definition of a sandwich. But yes, they had to come to a decision on what counted for legal reasons.
You should care (not saying it's bad you don't!), because the philosophy of it helps us distinguish between a system in which people participate in good faith but get mislead and cling to bad behavior out of fear, vs people participating in bad faith thinking they can get away with it.
The difference is in terms of punishment and enforcement mechanisms. The person who keeps doing something bad out of fear that there's no way out is, in a sense, a failure of society as a whole. The person who is doing something bad as a way to get a leg up thinking they can get away with it is a failure of themselves to understand that society comes with a social contract.
The end results and the ultimate suffering are the same. For the first situation, we want to educate people such that they are more aware and can avoid falling into that trap, and give them ways to get out of the trap that minimize damage. For the second situation, we want to isolate the damage they can cause and prevent them from causing more damage because they are fully conscious of what they are doing and what is going on, and that makes them more dangerous.
If you mess up and get into an inextricable situation, there should be a way to resolve that with the promise of personal growth (along with guard rails to prevent repeating the same mistakes). If you deliberately cause an inextricable situation so you can profit off of it, the only resolution is to isolate the person who caused it from committing further harm until they go through personal growth such that they don't want to cause that harm anymore because they understand that harming others also means harming themselves in the big picture.
There are some cases where I care about intent. Did somebody step on my toes? My reaction will depend on the extent to which I think they meant it.
But for large-scale financial crimes, I think worrying about that too much is not just unknowable and irrelevant, I think it's actively harmful.
As with toe-stepping, we can recognize that a whoopsie moment may not deserve punishment. E.g., if you're out hunting with your buds and accidentally shoot somebody in the face, as with Dick Cheney, that's different than intentionally shooting somebody.
But when somebody intentionally sets up or takes on a position of power, I think there are no whoopsies. Drinking a beer on the couch? Have fun. Drinking and getting in a car? Criminal. Drinking and getting in a car and killing somebody? It may be no more intentional than toe stepping. But at that point I don't really care whether they killed somebody because they meant to or not. The harm's the same.
I think this especially matters when we look at things like the 2008 financial crisis. It caused enormous damage, both in financial and human terms. Yet basically nobody was held accountable. Why? Because they didn't mean it. They were just greedy fuckers in positions of extraordinary power that they used for personal gain without regard to the human impact. Plus they were the sort of people who looked a lot like the people who made the laws. They went to the same parties and had nice friends. So they were all somehow let off the hook. And we did little to make sure they'd get held responsible the next time.
I think the personal growth bit is nice, but hopelessly naive. There are plenty of people who will do the right thing not out of love but of fear. There are worlds where those people are kept from doing harm, such that we can help them grow up to be decent. But we don't live in a world like that. And if we want to create that world, we need to stop the sociopaths and morally deficient goofs from causing massive trauma to those around them. Because I promise you, that will interfere with the victims' personal grwoth.
Which point of the Howey Test do you feel is not satisfied by Pokémon cards? (If your answer has anything to do with the existence of the game, I am curious what you think of baseball cards.)
You state that they don't satisfy the test with quite some certainty but left the reasoning to the reader; but, it would seem, to me, like Pokémon cards are no different from many of these cryptocurrencies the SEC is interested in:
In this case, some company decided to print a bunch of supposedly rare things that they pinkie swear are actually rare, even though this company can print more any time they want. People who buy these cards from the company don't even know what they are buying, which seems particularly egregious, and maybe should be regulated as an illegal lottery!
They then sell these things to people who are absolutely buying them with the expectation that they will go up in value. The people who print the cards insist they have "utility" in the form of a game people can play, and yet I have never heard of anyone actually playing this game... hell: the only 10 year old I know well happens to be obsessed with these cards and is presumably in the target market, and I'm not even certain he knows how to play the game!
Instead, this kid just keeps his cards in binders and talks constantly about their rarity and potential later sale value, as even our children are being turned into amateur investors by the marketing efforts of this company; and the reality is that--like other so-called "collectible" crazes--most of these cards are going to be near-worthless in the long term as this is just a bubble being held up by the company's management efforts designed to shill their shitcards.
(If your answer has anything to do with the existence of the game, I am curious what you think of baseball cards.)
Yes, if you ignore the primary reason for Pokemon cards (the game), then they can magically be made to look like securities....
They then sell these things to people who are absolutely buying them with the expectation that they will go up in value.
No, completely false and this betrays a complete lack of understanding of why people buy collectibles. People buy collectibles to collect them; the value is in possessing the collectible; rare collectibles have value because it is harder to acquire them to add to one's collection.
With respect to baseball cards: they are collectibles. They have value because people collect them. To keep. They don't represent an interest in a common for-profit enterprise, and they don't derive their value from the efforts of others. The value of a card is derived from the card itself: the quality of the print, the rarity of the card in its respective printing run, and (most importantly) its physical condition. Popular players' cards are usually more valuable because more people want to own the card, not because owning the card will somehow make you more money from that player's efforts. (I still have a few baseball cards from when I was a kid. My Ken Griffey Jr card is worth about a penny because it is not in good condition; my mint Tim Belcher card is worth $1.35 because I never had a reason to look at it. But even though nobody knows who he is outside of hardcore Dodgers fans, some people out there still want to have a complete Dodgers lineup from the 1987.)
And this is why analogies to collectibles always fail for crypto bros: collectibles have value in themselves, but crypto only has value to the extent it might represent something else.
In a 50 mile radius around me there are 44 officially sanctioned Pokemon tournaments happening this month. If you look outside your social circle you'll find that a lot of people play the #2 TCG in the world
There were (maybe even are) a ton of people playing Axie Infinity (an NFT rip-off of Pokémon) also; does that mean it isn't a security, because some people actually play it? When I was a kid I certainly knew people (including myself) who played Magic: The Gathering, and yet most of the reason we all bought as many cards as we did was the lottery and collectible trading mechanic.
If you are willing to admit that there are "utility" to these cards, then what makes them different from cryptocurrency projects that do the same? If the game weren't so popular--maybe it is one of the numerous card games we wouldn't quickly be able to name that are all rip-offs of the concept, but didn't have the juicy IP of Pokémon--would you then suddenly consider it a security?
If a crypto token has any utility other than being a balance on an account that can be traded (which some do, or at least purport to do), I think it should be a lot harder to call them a security. As most of them are though, they don't actually exist other than as an entry in a ledger.
The common enterprise here is, similar to the argument against cryptocurrencies, the efforts to make money off of these cards; and the efforts of others here is the work being put in by the company which printed these cards to market them and design this game. If the company suddenly disappeared tomorrow--or began to mismanage their product line, potentially suddenly printing a bunch of cards they previously claimed were rare--the value of these cards would plummet, as people aren't just buying them for their prior established value: they expect that this company will defend their IP portfolio, release expansions with new content, and continue the efforts to market this game in stores.
If you disagree with this analysis, maybe you can show how this is (or is not) different to, say, Axie Infinity (a crypto company even I actually do feel is a security under this test--with centralized servers managing centrally minted NFTs--and which is very similar in nature to Pokémon as it is clearly a rip-off of their IP) or (to take a more standard example) Filecoin (one which the SEC claims is a security in their lawsuit against Coinbase)?
The common enterprise test doesn't work for things where the primary purpose for most owners is to own the card (for playing, as with Pokemon, or for display, as with baseball cards or most other collectibles). That a small fraction of owners acquire collectibles to trade in them as valuable assets doesn't taint the fundamental character of the collectible for everyone else. (Contrast to crypto, where everyone buys crypto for the purpose of ultimately selling it for higher value since it has no other use or reason for existing.)
Axie Infinity might run afoul of the Howrey test because of deliberate design decisions in the game which make it nothing like Pokemon: the ability to cash-out in-game currency, and the ability to loan out axies to other players and make money from their in-game efforts. Unlike Pokemon cards, which can be loaned out by players without any involvement from the company printing the cards, loaning out axies and earning money from other players' playing required the active involvement of the company behind the game. Moreover, making money (and especially making money pyramid-style from loaning out your axies to other players) was marketed as the primary selling point for the game for over a year, in contrast to Pokemon and baseball cards where the printing companies have never made claims about the value of the cards or the putative income that could be derived from engaging in a career trading them.
"Through the efforts of others" is the activity of the block chain itself, which is engaging in economic activity in pursuit of profit. So, Axie infinity and FileCoin clearly fall under that.
There's no common enterprise for ordinary collectibles. A truly analogous situation would be if pokemon represented a share in the pokemon company where you could participate in the profits derived from pokemon merchandising or something like that.
I play the actual card game and it is does indeed have a very popular competitive scene. In fact the most valuable modern cards are the ones that satisfy both of 1) appealing artwork and 2) high usage in competitive play.
For older cards though I disagree that the the pokemon company can just reprint more any time they want and dilute the value. The most valuable card out there is the original first edition Charizard from the 90s. They can never really reprint this card and have it be treated in the exact same way. And they do regularly "remaster" or reprint the original set from the 90s in order to cash in on the nostalgic 30-somethings who now have a disposable income (I believe there is another one coming later this year). But these are just replicas and not the "real" thing. Kind of like an original antique/book/currency/artifact vs a replica.
However I'd say at least 50% of the cards in any printed set are not useful in gameplay if you are actually trying to build as competitive a deck as possible, and are really only good for collecting a complete set. They will also print "alternate artworks" of common cards which are the exact same gameplay-wise but visually different and artificially much rarer.
I deeply disapprove of Magic and honestly think that it shouldn't be allowed to be marketed to children if cigarettes aren't allowed to be marketed towards children. But an enormous number of people actually play the (shockingly boring) game. And while there's little doubt that most of the cards being purchased now are going to end up worthless, the "long term" in Magic has already been reached because it's been around for 30 years.
Magic is being held up by the early cards having been driven up in price by millennial and young gen x players who became adults with real incomes and social lives that revolved around the game. WoC manipulates the market as much as it can manage, trying to maintain the hope that one can strike it rich, but they make their money off the new cards, not the used ones.
It's the same thing that happened with comic books and baseball cards: people who bought baseball cards in the 50s and early/mid-60s found themselves with small fortunes, because there were wealthy nostalgic baby boomers to sell to. People bought baseball cards in the 80s and 90s trying to cargo cult the price increases of those classic cards, and the people who printed baseball cards played into that. That doesn't make baseball cards a type of security where one is investing in the growth in the community that buys baseball cards any more than buying a washing machine makes you an investor in the growth of the community that buys washing machines, although washing machines also have a resale value.
Buying crypto gives you nothing but a line in the distributed accounts of the people who are coining crypto. It's nothing but an obligation. There's not even the token value that a 10 cent stock certificate might provide.
> But an enormous number of people actually play the (shockingly boring) game.
Boring?! That's very subjective, don't you think? It's 'boring' in the sense that chess is boring.
There's an entire market around the cards, yes. You don't _need_ that if you just want to play and have fun, but people will try to min max everything. I used to play with borrowed decks since I figured out as a teen that building decks out of booster packs was far beyond what I was willing to spend.
Cigarettes are the only (legal) product it is illegal to market (in the US) except in very limited ways. The poster was saying that MtG should also be illegal to market, and therefore has to be compared to cigarettes in that limitation.
Much like if they had talked about an age limit on purchasing them, it would be related to cigarettes or alcohol (in the US).
Stellar point. I especially like the notion that cargo culting historic price increases is involved. You could look at so much of the cryptowhatever space as a series of cargo cults around different aspects of financial history. It seems like a crucial ingredient in any bubble, really.
... Pokemon cards were only used as an example to explain what happened, almost like an ELI5. Whether they'd pass they Howey Test or not is irrelevant.
Absolutely agreed. Back in college I met some very sincere, thoughtful, and kind libertarians. I occasionally imagine how horrified they'd be to learn that their considered and nuanced political philosophy had become a popular fig leaf for "I do what I want without regard to harm for others".
The problem is libertarianism has always been this way. Typically when you're younger it sounds like a good idea. It would likely work if people weren't assholes. Then you grow up and realize people are assholes. Most people grow out of their libertarian phase, but the ones I worry about are those that don't. All I can think about when I see an old libertarian is "That asshole would install a toxic waste dump beside my house and make me spend the rest of my short life suing them for damages"
Could be. But for me there's a difference between "we have to limit harm, but let's do it in ways that otherwise lean toward freedom" and the maximalist "I DO WHAT I WANT! YOU'RE NOT MY REAL DAD" types. So I agree the absolutist libertarians are somewhere between dangerously naive and sociopathic. And I think the volunteer billionaire defense squad is ridiculous. But I have met reasonable ones who saw it more as a direction to lean, a counterbalance to authoritarian approaches.
In this analogy you also had a service where people staked their Pokémon cards and advertised an APY% rate of return on those Pokémon cards, and had a service wherein people could use borrow and lend their Pokémon cards with the intent of financial gain.
Got me curious now, indeed a lot of people in the US have crypto however on the big scale the US is just a small fraction Of all crypto holders.
Assuming that in a lot of these countries crypto is no big issue and others have long banned it and still a huge adoption I really doubt the US alone would make a huge lasting dent banning it.
More interesting idea: tomorrow Microsoft delists from public exchange and only allows OTC to buy/sell this now private company — but you can only do so with Pokémon trading cards. And anyone that owns some is now a MS owner as well.
Now do you decide the Pokémon cards are securities?
Maybe I’m misunderstanding the analogy, but I thought wire fraud only applied to abuse of the bank wire system? Is unsavory advice really categorized as wire fraud?
A legal "wire" is any communication or signaling system allowing for the propagation of information across State lines, at least as far as I can tell from how it is regularly enforced.
You could use TCP over carrier pidgeon to implement your criminal communication network, and it'd still be eligible for wire fraud. The deserialization from what I assume would be message packets strapped to the pidgeon nets you as still using "electronics".
> Let's say that your analogy has zero actual bearing on what actually happened in this situation, and end the conversation there.
Yes.
Here's Celsius's web site archived in early 2022.[1] See what they claimed. They went all the way to being a fake bank. In their own words:
"Meet Celsius: a community of over 1 million users that
earn up to 17% yield on their crypto. Get paid new coins
every week and borrow cash at 1%. Buy coins, earn yield,
borrow, and transfer with no fees. Available on web
and mobile apps."
Celsius is not a bank, the customers were junior creditors. Junior creditors get paid after senior creditors. People should not deposit their money in not banks if they want guarantees on their deposits.
OK cool. My understanding is the FTC has a consumer protection mandate vs the SEC is about investor protection. So the FTC covers fair trade, deceptive and unfair business practises and that sort of thing vs the SEC will cover securities fraud, illegal marketing of securities to unqualified investors and whatnot.
I am somewhat confused about the situation, but your own link says
> The companies also agreed to a judgment of $4.7 billion, which will be suspended to permit Celsius to return its remaining assets to consumers in bankruptcy proceedings.
This seems like the FTC claims the judgment is suspend so the normal clientele can have its money back, not any institutional investors who knowingly put their money at risk by investing into the company itself.
I'm not up on all the details of the situation, but "after creditors and investors" means $0, right? Why is a fine getting less priority than investors? Isn't that a moral hazard?
I went looking a little more, the FTC itself says something quite different, unless CNBC is calling the clients "investors".
> The companies also agreed to a judgment of $4.7 billion, which will be suspended to permit Celsius to return its remaining assets to consumers in bankruptcy proceedings.
Would someone explain to me what the endgame of these fraudsters is? I mean, of course they are trying to get rich quick pulling these schemes but you would believe that they do it because they perceive that there is some sort of opportunity to cash out without inevitably going to prison some day, right? What is the thought process in the mind of these criminals when shit hits the fan? Maybe just hire very expensive lawyers or move to some weird jurisdiction where they can't get arrested?
FTX, 3AC, Celsius, etc. took the crypto pill and believed their investments were going to the moon with no way to stop it. That's why they took such risky bets (with customer money, too) - because in the certain case that Bitcoin hit $1M they would be trillionaires.
Of course because of this attitude there was way too much leverage in the system, which drove up prices to ATHs temporarily, but when the money supply ran out things quickly came back to reality and that leverage turned into bankruptcy.
Though in an alternate universe, the fed never raised rates, GBTC became a spot ETF, crypto fervor continued, and SBF is the richest man on earth having leveraged customer funds in a scam that actually worked out.
> in the certain case that Bitcoin hit $1M they would be trillionaires.
I never could understand this. Crypto currently makes up about 7% of the world's money supply, according to a quick search.
Bitcoin is currently ~30k USD.
If you bumped that to 1 million USD, a 33x increase in value, and assume that other crypto would go up roughly the same amount...
... You get the impossible answer that crypto would be worth well over 200% of the entire rest of the money in the world.
This is ignoring inflation but from what I heard crypto nuts really thought this was possible in a short time frame, like 5-10 years, in which case inflation of real money wouldn't make a huge difference.
This is just ridiculous. All the possible outcomes don't make sense:
* you end up with a small group of mostly men controlling nearly
all crypto so it's no different from the old system.
* Except there's even less checks and balances.
* It would massively destabilize the world economy and cause all kinds of inequality issues for people who don't have internet/technical ability
* But most importantly, the existing world governments would never accept it. At some point they would see this new force destabilizing their economies and established power structures and just say hell no. It would start with China and US, but eventually
nearly every country in the world followed this. Then crypto is worthless because you can't spend it in a legal way and there's no way it would maintain a high value.
A 33x in Bitcoin price would put it just above the value of all the world's gold. Obviously not really realistic but if you're a crypto-piller and believe Bitcoin will be the next Gold then it's a decent benchmark moon price.
Also the article you posted very specifically says that the market cap of cryptos is equivalent to 7% of the narrow money supply (not the full money supply, and NOT that crypto currently makes up about 7% of the world's money supply). Doesn't make sense to compare non-narrow with narrow IMO - i.e. you need to include ALL assets with the same liquidity.
Ok, thanks for the feedback. Do you think my points are still valid under this less extreme scenario?
Let's assume a 25x - 50x increase of the value of all crypto in a 5-10 year time span.
What percentage of all relevant assets would that make up? And would it be enough to destabilize world economies enough for governments to take action?
> Notoriously weak prosecution of white collar crime makes more people willing to take risks
This is more a perceptions problem in Silicon Valley. Every fraud announcement is followed by hand wringing around the lack of prosecution. Every prosecution, convictions. Every conviction, sentencing.
In the case of Celsius, this seems like one of those a case of starting with good intentions, but quickly turning into fraud city in desperate attempts to keep the boat afloat.
For the more run-of-the-mill crypto scammers, there's a combination of over-confidence that no one can touch them, or will bother to come after them. Or they just don't even think that far. For a lot of the bullshit influencer pump and dumps, the worst that's happened has been ZachXBT or Coffeezilla exposing your bullshit. Which is a good thing, but the influencer just pops back up with another get rich quick scheme in a couple months for a new group of rubes.
Some of them do exit. There are many crypto pump-and-dump schemes where the project website is zombified, and the founders are MIA (and are probably sipping cocktails on a beach somewhere).
The big fish though... The FTX founder was described as being a gambling addict: he would take any risk as long as the outcome was statistically favorable. And I think this attitude was pervasive among many of the biggest crypto names. They were't looking for exits, they were looking to go even bigger because they can't help themselves.
One of the things you have to understand about fraud is that much of it isn't rationally planned from the get-go. People get into situations and get caught up in the dynamics of them.
Imagine a founder. He has an idea he thinks is brilliant. A sure money-maker. He's a bit of a dreamer, and objective observers would question whether it's possible. But the nay-sayers have been wrong before, and he believes in the idea. So he goes looking for money.
As part of that process, he learns to pitch. He figures out the most convincing things to say, and how to say them with maximum persuasion. Is what he saying true or correct? That doesn't really matter. It might not even be knowable at this point. The key incentives for him are whether people respond emotionally in ways that they give him money.
So imagine he does that and he gets the money. He has some investors who expect big returns. They may not really understand the topic, but they liked his confidence, and they too started to believe. But what they really want is more money back, and their belief is going to be partly contingent on seeing that happen.
Our founder starts to spend the money, trying to make it real. Maybe the product works. Maybe he has some success selling it. (Maybe he is even selling it despite it not working, a surprisingly common outcome.) It's not going as well as he hoped, but he's still confident. He still believes. Because that's the performance his investors want for him. But he's used to putting a positive spin on things, so he tells investors what they want to hear that it's going great.
At some point, some of the investors get nervous. They expected returns. He led them to believe there would be big returns. So he pays some of those people some money. An accountant might say he has to pay them profits, not other investors' money. But the money's all jumbled up both in his head and in the world. If there's any impropriety, something his brain will anxiously skip over, he knows he'll make it right in the end. Because this is going to be a big success.
From there, the cycle continues. The founder digs the hole deeper and deeper over time. As long as he's confident, as long as he performs success, new money will keep rolling in. And with it comes hope. Maybe it will all work out! Maybe they'll be so successful that they'll pay everybody back and nobody will notice a little early corner-cutting.
Objectively, of course, things are getting more and more obviously criminal. But there's nobody objective around. The founder is instead surrounded by dupes, fools, and the complicit. To the extent that anybody honestly recognizes the criminality, they mostly don't talk about it or they get out ASAP.
So to answer your question, there is generally no planned endgame, the same way I didn't have a planned endgame for eating a lot of cheeseburgers in my 20s. I may have heard about the consequences, but they didn't affect my behavior. It's not that I had a bad plan. I not only had no plan, but didn't think enough about the future to even have a place in my mind where a plan would go.
I think the end game is something like making enough money such that doing some time would make it worth it, and we all know how white collar crime is punished. Of course they stash a lot of money so even after a lot of it is clawed back they keep enough.
All evidence from the people I know who have gone to work in that industry is that it's a mix of true believers, and 50% outright narcissistic sociopaths who know how to manipulate true believers.
And then about 20% of people who just think the whole thing is "nifty" and getting to write fancy software or build a business around it is kinda fun, and they paid lots, so whatever.
And unfortunately I think the tech industry unintentionally enabled it in a few ways.
The internet/mobile boom was a real leap for humanity. (Not an unmixed one, any more than the printing press was. But a real leap nonetheless.) This left a lot investors looking for the Next Big Thing. I think it made regulators very cautious of possibly harming something that could be The Future. Journalists were accustomed to telling uncritical gee-whiz and great-man stories about tech. And we ended up with a cultural archetype of the genius tech founder in the Steve Jobs/Tony Stark mold.
All of these things were vigorously exploited by the cryptocurrency fraudsters and blockchain grifters. That harmed all the people they suckered, of course. But I also think it was terrible for the tech industry. The culture flowed back into tech, and also created an incentive toward hype. All the years and all the money spent on the mining/blockchain/smart contract/ICO/DAO/NFT/DeFi/Web3 series of bullshit "innovations" could have gone to real technology and real companies. All the bright young people distracted by that stuff who instead of learning the fundamentals of real business and real tech who will have to spend years deprogramming themselves.
Hopefully next time around we can be more discerning, more usefully critical.
I said unintentional because a lot of the same factors were helpful for the tech industry and we as an industry just blithely accepted their continuance. That includes the VC money spigots for sure.
But there are plenty of actors, specific VCs included, where I have a hard time believing they didn't know better. In my view it was often their job to know better.
Very much intentional, especially after the first couple rounds of fraud/theft/bad behavior, it's obvious that the downsides and risks were known, but the promotion of the tech kept being promoted.
It's understandable why these were modded into invisibility ;)
--
@nancyhn: “The banking industry is a fraudster's paradise. The difference is they don't get arrested, they get bailed out with bonuses. It seems there are a lot of short memories here who don't remember 2008.”
--
icepat: “If you rolled back every bitcoin transaction ever made you would end up with people in debt because the transaction fees were paid. This makes bitcoin into a scam. The miners in total are guaranteed to win, everyone else in total is guaranteed to lose. Some people haven't realized their loss but it's there. It is an ingenious scam because it's not the scammers who hype it up, no, it's the marks because the only way they can get ahead if they hype it up. The miners get their cut no matter what.”
“This is not the same for say, gold, because gold can be made into, say, electronics which now can be sold for more than the sum of the cost of the components. Stocks pay dividends etc.”
“Since so fundamentally it's a scam, is it a wonder other scams are built on top?”
Strongly agree with the point made about the miners being criminally overlooked in all of this. If crypto and Bitcoin are camouflaged pyramid schemes, the people at the top of the pyramid- even above the exchanges and the hucksters and the VCs, are the small handful big miners who have been doing it even before BTC was a few dollars each.
There's a huge misdirection in the very thin narrative about minors, which is that "everyone knows" they've always had to sell the entirety of their coin bases to break even. This is completely taking the miners at their word when there is absolutely no reason to believe any of it.
The reason the price is stabilized every time it should fall is because the miners, and the OG miners alone, have the ability to collectively throttle back on selling their newly mined coins to the market and can do so almost indefinitely because of the massive profits they realized on early gains held long term. This is the true source of number go up and I'm surprised how little attention it's been given, probably because miners are notoriously publicity shy. You'll notice they're never talked about it any of these articles.
> All the years and all the money spent on the mining/blockchain/smart contract/ICO/DAO/NFT/DeFi/Web3 series of bullshit "innovations" could have gone to real technology and real companies.
Really? I imagine all the effort simply redirected towards social media (bad), adtech (bad), fintech (mostly based on ZIRP, like BNPL), self-driving cars (pie in the sky) and gig economy. The only truly useful thing SV worked on in the past decade was Cloud.
Yeah, fair point. We could also include all the "blitzscaling" nonsense, which, given its ability to soak up far more capital, is much more attractive to VCs, allowing a pump-and-dump on a titanic scale.
But I saw so many entrepreneurs getting pulled into blockchain-ish spaces thinking they could do some good. Even given that most of the money would have gone to something else terrible, there were a lot of people who might have focused on actually useful things.
> Hopefully next time around we can be more discerning, more usefully critical.
Like after the destruction of democracy by social media? Or the implosion of the dot com bubble? How many more times does the tech industry get to just say "Hopefully next time!"
For what it's worth, I think that whatever we choose to do, we're going to get a lot less leeway in the future. I was just at a Trust & Safety conference. European legislators and regulators are very much cracking down on the social media space, and it's clear that years of slippery behavior from places like Meta have burned a lot of goodwill.
> If you rolled back every bitcoin transaction ever made you would end up with people in debt because the transaction fees were paid.
This can be said about every bank transaction that charges a fee as well. Not a crypto fan at all (I find it rather silly overall), however this is not a particularly strong angle to attack it from.
Are you really quoting fucking human trafficker Andrew Tate on economics?
Electronic funds transfer (including credit cards) increase the velocity of money significantly. This means more transactions, which means more overall wealth creation.
To say nothing of the fact that of that 1.5% fee, I'm recovering most, all, or more than it with things like cashback, rewards points, etc.
As noted by another poster, all transactions cost someone something on every monetary network. You're also completely ignoring all the benefits miners provide by securing the network etc...
Celcius, FTX, et al the many thousands of shitcoins are all scams or pyramid schemes without merit. Bitcoin, despite that fact that early adopters profit greatly, has many benefits to individuals and society as a whole but many people have simply closed themselves off to the possibility because they're unwilling, for mostly selfish reasons, to even consider the benefits.
> but many people have simply closed themselves off to the possibility because they're unwilling, for mostly selfish reasons, to even consider the benefits.
And many people have considered the benefits and have rejected the scheme anyway.
I'm curious, though... what do you mean by "selfish reasons"? That implies that such people are making a decision that disadvantages others in order to give themselves an advantage. I'm struggling to see how that concept applies here.
It's selfish to reject something beneficial to everyone because you won't benefit as much as others, no? Maybe jealousy is a better adjective.
You continue to call it a "scheme" but it was literally invented due to the corruption and malfeasance and "schemes" of the current banking system. Do you call those schemes and scams as well or are those just the ones we've deemed acceptable and necessary for some reason?
FWIW, I think the current system is unstoppable and inflation is necessary theft because that's just how it works but I do believe people should be able to save and not lose value. On a long-term basis, Bitcoin achieves that when essentially nothing else can because we've designed it that way.
We're all "rich" here and I get why most of us simply want that to continue.
> It's selfish to reject something beneficial to everyone because you won't benefit as much as others, no?
If I decide not to use cryptocurrencies, I am not denying anyone else from using cryptocurrencies. My decision disadvantages nobody. There is no social duty to use cryptocurrencies.
Also, if I disagree that cryptocurrency is "beneficial to everyone" (and I do), then I'm not being selfish for not taking part no matter what.
> You continue to call it a "scheme"
I did not intend "scheme" as a pejorative. I meant it to mean "plan" or "system". My apologies for the miscommunication here.
> We're all "rich" here and I get why most of us simply want that to continue.
Umm, what? I honestly don't understand what you mean by this.
AI is not in the same category in my book. Both may be overhyped in some ways, but blockchain technology was fundamentally a bad idea with no legitimate use cases.
For better or worse, Crypto is legitimately the easiest way to create a financial application, derivative, exchange etc... any programmer can create interesting, useful, and novel financial instruments like Squeeth, crvUSD, PoolTogether, etc in short order. Good luck recreating those in TradFi in under a decade, let along making them interact with each other in atomic transactions.
Of course, some people see this as a bad thing because it enables scammers to create all sorts of new and improved ponzi schemes. Others think it's a good thing because it speeds up financial innovation and levels the playing field between big banks and small startups.
Some might argue that crypto is only useful for building apps insofar as it avoids regulation, but you also can't convince me that Wells Fargo is the future of finance. Banks could never create a financial playground that works as well as Ethereum, even using their centralized database.
IMO, so many of the projects that have come out of the crypto space are awesome and promising, but investment in the space grew faster than projects could mature. Unfortunately that leads to users losing $100M when Joe Schmo's cross-chain bridge gets hacked, when it should have never had that much TVL.
I'd argue that the difficulty in banking is not to get the technology working.
Financial software is regular software with additional audits and checks to make sure it's safe against the flood of attacks it will receive. With the kind of money we are talking about, you can hire people with the expertise to reasonably protect you against bugs and software exploits (something most traditional financial companies have a close to 100% track record in but many crypto projects failed).
But after that you have a mountain of issues to consider that have little to nothing to do with software:
- financial logical holes like flash loans being used to extract money "democratically"
- people committing age old scams "but on the block chain"
- founders not understanding problems such as that you cannot secure one unsecured coin with another one no matter the algorithm.
- all sorts of unpleasant people using your "financial playground" to do things society frowns upon.
All of these are solvable but not by choosing a better technology stack. Look at how much traditional institutions are spending on compliance and realise that you probably won't be able to cut that by an order of magnitude.
Crypto is learning very quickly that most regulations do not exist to "keep the little man down" but because having regular people get fleeced over and over by charismatics liers/fools can have a devastating effect on any community.
If technology is not the problem then why is technology in traditional banking so bad? I do banking operations as a big part of my job, and can tell you that there are close to zero banks today that have even heard of APIs. The only ones that did were Silvergate, SVB, and Signature, and those were singled out and shut down by tradfi.
If banks had good technology then companies like Plaid and Modern Treasury wouldn't exist. MT starts off at $70k/yr, but in crypto land I could replicate their entire product with 5 lines of JavaScript.
Moving money via USDC on Polygon/Ethereum is far and away the easiest and most secure banking experience. I can do things that are simply impossible with regular banks, like write custom logic to determine how many approvers a transaction requires, or use an escrow contract to ensure both parties deliver on a promise with no middleman.
The one legitimate use case of using blockchain for decentralized digital currency ends up being used by everyone who can’t transfer funds using normal routes. So most of the people using it are either bad actors or speculators
Kind of like Tor. Bad actors ruin all kinds of things. People who only see technology will only go on to repeat the mistakes of the past because they lack the necessary domain knowledge to know better.
> So most of the people using it are either bad actors or speculators
"bad actors" according to their government, which could mean people who simply want the right to vote, or to live free from oppression, secret police, etc.
Even if we take this at face value and assume these are all dissidents seeking freedom, cryptocurrencies would be a bad idea because they force you to leave a paper trail for prosecutors and deal with intermediaries who could be suborned. If Iranian dissidents buy something with cash, they might find that the person they thought was trustworthy is secretly working for the police and they’re going to have a bad time but they would at least only have proof of that single transaction. If they use cryptocurrency, the police get likely years worth of transaction history and a list of everyone you’ve worked with.
>So most of the people using it are either bad actors or speculators
It's a matter of perspective. For many people around the world, the US government is the bad actor, the bad actor preventing them transferring funds through "normal" (US controlled) routes.
You are claiming that there is some sort of mathematical proof that this AI has no "worth"? There are a lot of people who are finding value from probabilistic generative AI, to the extent that they are willing to pay OpenAI $20/month to get access to the best model available, so I think that counteracts whatever sort of mathematical proof you might make.
It's true that crypto has a lot of users too, but I think the difference is that these users are mostly being deceived into thinking that their involvement in crypto will make them rich in the future, when it will not. AI is giving people immediate value instead of making promises of future wealth.
There are several very obvious uses for ChatGPT. Almost everyone I've seen use it can think of something they want to use it for.
I've never had someone give me a plausible usecase for blockchains or crypto currencies. Once you push on the usecases I have heard it quickly devolves into "you just don't get it" or some kind of appeal to authority like "well all the VCs wouldn't be investing in it if it wasn't valuable, clearly they're smarter than you."
AI is exactly the same to marks that don't know any better and think complex new technology = $$$. AI having use cases for megacorps doesn't mean that scammers won't leverage the hype to sell get rich quick scams.
These articles are mostly promoting bitcoin as a viable currency for people in desperate situations, and yes, possibly, if you are in an extreme situation like being extorted by someone with ransomware, or in a place where your government is falling apart or targeting you as a criminal, you might have some reason to use cryptocurrency in this way. But since it does such a terrible job as a currency (extremely inefficient, slow, and irreversible transactions, price volatility, no intrinsic value, etc) it should really always be a choice of last resort.
Bitcoin has proven to be an inflation resistant store of value enabling private and fast transactions to anywhere in the world - seems pretty successful to me despite being constantly derided by hacker news for over 10 years now.
Almost every word of that is untrue in practice. But let's focus on the core part, "successful".
Let's compare with M-PESA, a money transfer solution that started around the same time. M-PESA has steadily grown, doing 26 billion transactions last year. [1] Bitcoin was somewhere around 100m transactions for the same period. [2] That's about 0.5% of the volume. And its worse than the raw numbers suggest, in that the M-PESA transactions were things with positive economic impact, whereas a lot of the Bitcoin activity was driven by speculation or crime.
And that's wildly smaller than the number of credit and debit transactions that happened over the same time, of course. Bitcoin was hoping to be "electronic cash", but the shift away from physical cash was toward the already existing digital payment mechanisms, not Bitcoin. Merchant adoption, always small, went into decline years ago.
So no, Bitcoin was not successful in the sort of terms that match its initial goals or what was hyped in the early years.
Firstly, Transaction volume and total number of transactions are two different metrics. Bitcoin transactions are generally in the $400k-$800k range. Couple things that makes bitcoin more than what it appears:
The metrics you quoted are on chain. There are no telling how many transactions are rolled up through the lightening network.
With around $20B of various wrapped bitcoins being used in defi, you can easily put that number up to hundreds of millions of transactions 'a-day' because bitcoin is being used as collatoral.
We are in a 'bear market' for crypto and it's market cap is $600B, which is larger than some countries let alone M-PESA.
I have a lot of questions about people who are making $400k-$800k cash-like transactions. But as far as I'm concerned, that's another sign of Bitcoin's failure in terms of its original goals. That's a sign that Bitcoin is even less useful for productive economic activity.
> market cap is $600B
Sorry, but talking about "market cap" for currencies and commodities is ridiculous. What's the market cap of the US dollar? What's the market cap of gold? Those are fundamentally stupid questions, because "market cap" only applies to equities, which are pieces of a single entity that is both economically productive and owns a bunch of assets. Market capitalization matters because with a company, anybody with enough money can go out and buy the whole thing. It's not a meaningful number for a currency or a commodity. Or for a cryptocurrency.
Money supply (M0, M1, M2, etc.) is an important concept, no citation needed.
Your quarrel seems be with the broad application of the term "market capitalization." From context, it's clear what people mean, much as it's clear what it means to "dial" a phone number on a phone that doesn't have a dial. Surely there's a better response against digital currencies than stating that Bitcoin's $607B aggregate value isn't technically called a "market cap."
It is clear what it means: a bunch of grifters are trying to pretend their magic beans are an actual investment like equities are. So they want a big and impressive sounding numbers, especially one that can be easily manipulated by wash trades and the like.
> Bitcoin transactions are generally in the $400k-$800k range.
What percentage of those 400k-800k transactions do you think are by the very banks and hedge funds that crypto advocates claim to be subverting and defying? For a currency that is supposed to help the masses that sure doesn’t seem like the kind of money most people play with.
Read my post, I said successful as a 'store of value' not 'electronic cash'.
Bitcoin is more akin to gold - an inflation resistant store of value. There is a premium for transacting it which means you should convert it into a more inflation prone transactional currency if you want to spend it.
Well look at those goalposts move. Bitcoin's original purpose was precisely electronic cash: https://bitcoin.org/bitcoin.pdf
But if you'd like to shift focus to why "store of value" is also wrong, I'm glad to. A store of value needs to be more stable than the thing you're moving out of. It also needs to be relatively liquid, and should have low transaction costs. But Bitcoin is very volatile compared with major fiat currencies, and also when compared with gold. Transaction costs are relatively high. The market is thinly traded, and is widely believed to be manipulated. Gold, in contrast, is more liquid, cheaper to trade in, and much better regulated.
So no, Bitcoin doesn't make for a good store of value. People wanting to store value would generally be much better off buying index funds, which are also pretty inflation resistant, and also have a positive return. But if they want to avoid equity exposure, then the gold standard for this is, well, gold. Bitcoin is terrible by comparison.
Again you're mixing up short term cash and long term store of value.
Cash you want stability, fast and low cost transactions - you pay for all those benefits with inflation.
A good long term store of value you will sacrifice a little of all those things for better inflation resistance.
Gold and index funds are also good for long term value storage, but index funds you can't really use as a medium for exchange, and gold is physical so not great for easy and quick transactions.
You have ignored the central part of this: volatility. Bitcoin is not a good store of value. I don't have time for people who argue so misleadingly, so I'm done here.
Cool, well the price of Bitcoin disagrees with you. Maybe you should think why after 10 years of the same tired arguments, Bitcoin is still going strong. How many years of success will it take for you to change your mind? Serious question.
BTC seems to be very interest rate dependent- it goes up when rates go down and down when rates go up. That is pretty much the opposite of an "inflation resistant store of value". It's financial behavior over the last ten years isn't that of a "inflation resistant store of value" its that of a "speculative, very risky investment."
Ideologically, to a certain type of person, it should be inflation resistant. The math says so! But the markets have judged it to not be so. So who are you going to trust? Your ideology or the market?
This site is full of people who are in a tech rat race, and the distribution has changed over time. It's now biased largely against crypto, and for reasons that I think are fairly clear:
Most of the users who would have agreed with you already got rich, because they understood the things you understand, and they don't use the site much anymore as a result (they are no longer in the rat race). They've mostly checked out.
So, because the people who remain on this site are those who never bought any, and people like to hear that they were right, the groupthink tends to be unrealistically negative about it.
The value will deflate at some point, it's kind of a mathematical certainty. We cannot extract more money from the system than we put in, since Bitcoin is a non-productive asset. It does not generate revenue the way that a business/company does. And someone has to pay for the electricity of the miners, so money is draining out of the system, making it a negative sum game that people are playing.
I would also disagree that the transactions are fast or private.
Private as in independent of going through any bank or institution like you would have to do to move money internationally in any other form.
A store of value like gold, the dollar, or Bitcoin has nothing to do with generating revenue - only the intrinsic value of how hard is it to create more - dollars can be printed, a gold vein can be discovered tomorrow that would crash the price, Bitcoin on the other hand there's no chance of creating more than what's planned - which makes it a great store of value in turn valuable.
One nice thing about gold is that we don't have to keep paying money for gold to continue to exist. It will sit on a shelf and not charge us any money for sitting there. Bitcoin exists on a network of computers that need electricity to run. If we stopped paying for this network to run, the bitcoin would stop existing, since the ownership of bitcoin really is solely determined by the ownership records on this computer network.
That is my argument, that Bitcoin cannot maintain its value long term because the value is leaking out of the system in the form of electricity bills. Furthermore, we cannot let these bills become too small, or else the network becomes vulnerable to a 51% attack, so as a society we collectively must pay a large amount of "rent" on this store of value, which causes the value in this value pool to slowly deflate over time.
We have been overcoming this drain so far by "investors" continuing to pour money into the system, but those investors cannot possibly get all of their money back, because it's been spent on electricity.
By your own argument gold is expensive - expensive to secure, expensive to transport, slow to transport (time is money), expensive to verify. So yes it does cost money to hold and transact gold. So your same 'leaky' argument applies. Maintaining any store of value or currency is never free, but the benefits far outweigh the costs as now we have an inflation resistant medium on which to trade goods and services with.
Well I'm not trying to argue for gold being a good store of value either, it might not be. But another reason why I would prefer to have gold is that people make use of gold to make jewelry and electronics, so that creates a demand that helps to prop up its value.
The point I was making is that in a passive state, just sitting on a shelf, I believe that the cost of maintaining ownership of all the gold in the world is orders of magnitude lower than the cost of maintaining the entire bitcoin network, and I think that must continue to be the case due to the threat of 51% attacks. (If the cost of running the bitcoin network drops below a certain threshold, it becomes profitable for a rogue actor to rent a large amount of compute power and force in some fraudulent transactions.) So I believe that the "leaky bucket" effect is stronger with bitcoin than it is with gold, and there isn't a similar real world use case of bitcoin similar to the manufacturing of jewelry like there is for gold to counteract this leak.
Therefore, the total value held by all of the holders of bitcoin must be declining due to this leak, which counteracts the idea that it is inflation resistant in the long term.
Your passive analogy doesn't work because Gold needs to be secured and defended, which requires energy or other people are going to steal it.
Just like Bitcoin needs to be secured and defended with compute for at least new transactions. A 51% attack will allow you block new transactions or double spend coins you have, not spend or steal other people's coins on the ledger because you don't have the private keys for those.
Yes, and I believe that the total energy needed to secure and defend all the gold in the world is still much lower than the total energy needed to run the entire bitcoin network. I don't feel motivated to do a back of the envelope calculation to justify that claim though, so maybe we disagree on that point. Still, there is the material usage argument for gold that helps it maintain its value that bitcoin does not have going for it.
Even if a 51% attack only allows the attacker to double spend, that is stealing someone's coins, namely the coins of the party that you reversed the transaction on the first time you spent the coins. In addition, once people realized that double spends were occurring and were possible, it would cause a loss of confidence in the coin, causing a loss of perceived value, which then lowers the sale price (i.e. the "actual" value), meaning that the coin would not serving as a very good inflation resistant store of value.
Yep computing the energy comparison we’re not going to figure out here, but if you’re right then it would mean that it would require less energy to attack Fort Knox and take their gold. If not that means Bitcoin requires less energy. So which is it?
I’m going to store my value in the thing that’s harder to crack (which must mean it will require more energy, will it not?)
I didn't say anything about the amount of energy required to steal gold from anyone. I was talking about the energy required to maintain the ownership of the gold. These are two completely different things. If I bury a box of gold in the woods, I can then spend zero energy to keep that box exactly where it is, but a thief might have to spend a lot of energy to dig many holes in the forest ground since they don't know where I buried it. Or, more likely, they don't know who I am or that I own any gold, and the energy required to steal the gold from me is kind of infinite since they have no idea where to start, and would be required to do some sort of brute force search of the entire planet.
The point I was making is that I believe that the bitcoin value storage system burns more energy in a "passive" state, just keeping all the coins safe than the gold storage system, where security by obscurity is doing a lot of the work. As far as whether it takes more energy to mount a 51% attack on the bitcoin network or to rob Fort Knox, I don't know. That is a different and irrelevant question. I'm sure that the energy spent on the guards and A/C and everything for the building containing gold at Fort Knox must be far less than the energy usage of bitcoin, but that doesn't necessarily mean that it is easier to steal from Fort Knox and get away with it.
> Plenty of great ideas and easy-to-see use cases from that first paragraph alone.
Such as?
Blockchains enable trust-less and decentralized ledgers at the expense of major trade-offs (user experience, lack of transaction reversibility, proof-of-work to secure the network, etc).
Most useful business happens off-chain in the real-world, so you need to bridge between blockchain state and real-world state using a trusted party which throws away all the decentralization and trustlessness advantages, so you may as well just let the trusted party run a conventional database directly, and avoid the major trade-offs.
I can't think of many useful & valuable use-cases that happen fully on-chain with no off-chain interactions, aside from cryptocurrencies. As soon as you have off-chain interactions (which is most of blockchain usage outside of cryptocurrency applications), the value proposition of using a blockchain goes away and a database makes more sense.
AI has real use cases besides just doing crimes. I mean AI's most profitable use case right now is definitely crimes, but it can also be used to put people out of work.
Some people are confused about SEC involvement. As a reminder, the SEC cannot bring criminal charges. If someone gets arrested, Department of Justice decided to arrest them.
> The U.S. Attorney's Office in Manhattan said it would hold a press conference at 11:30 a.m. ET (1530 GMT) to provide details on the charges against Mashinsky and Cohen-Pavon.
The document references the Code of Laws of the United States of America or USC, specifically the sections on Securities Fraud, Commodities Fraud, and Wire Fraud. The SEC didn't add these sections just for this case, they were there before Celsius was founded.
I think that it's more accurate to say that the legality of these actions wasn't clear, which everybody knew from the start. These companies decided to take a risk, and they rolled badly on the dice.
The legality is still unclear, too. We don't know whether or not these companies violated the law until a court rules on it.
They were completely clear. The whole time. There were no moments when it was a reasonable thought that securities weren't securities "because blockchain.
Okay, now that I have your attention, how about a new sort of crypto investment. Let me pitch you.. A privatized prison just for crypto scammers and bros. They could be the almost free hb1-labour, but with alot more entrepreneural spirit. Get coders, managers and advertisers at very reasonable prices. Payable even bitcoin or montero.
I haven’t followed crypto very closely, but I noticed a few names. I’ve read the headlines for the last few weeks. It seems like most prominent players are now in legal trouble, enough to force them to cease operations.
Who are the most prominent players who are operating?
>Groundlink vision was that happy drivers = happy customers while Uber was subsidizing rides for Millennials = IPO of a money loosing business.
When people miss basic typos it can sometimes expose a culture of grift going all the way down. The reason many dictators have horrendous interior design in their palaces. Their cousin gets the contract and then it gets outsourced in a chain a dozen times before someone buys the actual thing off AliExpress and pockets $5.
It probably makes me a shallow person, but the only financial news that I find worth reading (i.e. afterwards I understand things a little better) is Matt Levine's column.
Waa looking to see if he was featured in the Forbes magazine front cover. He was somewhat praised in their articles. I guess it is true, Forbes is the honeypot for Tech scumbags haha
This is great for crypto. Justice for scammers who thought crypto users could be taken advantage of without consequence. Ponzi schemes like Celsius are not exclusive to crypto and it's great to know the Justice department will prosecute scammers regardless of the unit of currency being used.
I get what you’re trying to say, but honestly? All this does is hurt the reputation of crypto further. It’s yet another headline about crypto scams/ponzi scheme/etc. projected to an audience that is weary of being easily scammed out of money they believe to be safer elsewhere.
No one who is skeptical or on the fence about crypto is going to see this headline and go “oh good! They must be catching the bad guys, so now I feel more secure about getting into crypto.” Just like no one who sees an explosion in arrests of violent criminals in their home town thinks “good, must be a lot safer here now.”
The nice thing about Bitcoin is that it's success is not based on good/bad PR. Bitcoin has a solid technical foundation and practical use cases that has weathered every kind of criticism for over 10 years now and is still on top.
Celsius and earn programs/scams like it is just another trial Bitcoin has passed through and is stronger for it.
Moving large amounts of money 24/7 worldwide, outside of any bank, quickly, low transaction fee - pure P2P, and then being able to store it securely outside of a bank in your pocket.
Have you dealt with wiring money before? How about holding large amounts of currency or gold outside of a bank? It sucks.
The problem is that the use case is generally criminal, which crypto people elide by complaining about whichever country's government is currently being attacked in the media. They do this in order to make dodging taxes and government oversight sound heroic. It's also a way to transform a conversation about fraud and free-riding into easy nationalist cheerleading.
What people want is anonymity, cheap/free checking, and cheap/free money transfers. Crypto thus far has partially supplied the first, and is so bad at the second two that the only profitable reason to use it is to dodge some sort of official oversight when dealing with large amounts of money.
I must be a criminal then lol. Banks are a pain in the ass to deal with. Bitcoin is a very practical and easy way to move large amounts of money around. That's why a lot of people use it. We pay our taxes when transacting it just the same. If you don't use Bitcoin, great, but don't make assumptions about those of us who do.
> Banks are a pain in the ass to deal with. Bitcoin is a very practical and easy way to move large amounts of money around.
There is no way you will convince me that setting up and using Bitcoin for daily transactions, all on your own wallet with your keys etc., is “easy” or any less of a “pain in the ass” than using a regular modern bank is on a daily basis. That’s even ignoring the baseline tech literacy one needs to have to get set up.
It’s a dead horse at this point but “practical” also comes at odds with bitcoin’s volatility.
As a US citizen who has lived for multiple years in Vietnam, I can guarantee to you that using Bitcoin is infinitely easier than dealing with the VN banking system. Forget the legal/identity aspects, just the language and cultural barriers alone are a huge pain in the arse.
I find it hard to believe you are doing even half your daily transactions without converting to fiat. I also don’t know how you can wait a few minutes for a transaction to clear potentially dozens of times in a single day. So my guess is you largely deal with dong regardless of how you store your wealth.
This just sounds like a quick sound bite where the day to day realities would tell a more nuanced story.
If it were more convenient, then more people would be doing it. There is nothing convenient about setting up a bitcoin wallet and converting your money back-and-forth between it dozens of times a week, if not a day. This is especially difficult without the regular use of exchanges, which many crypto advocates will try to dissuade you from storing any crypto on, because you are functionally just using a bank again at that point and exposing yourself. “Not your keys not your crypto,” plus another online account to get hacked.
Being your own bank is a ton of work and most people don’t want to deal with that.
You're stuck on bitcoin, there are other cryptos far more suited to these things, like USDC/USDT. I only mentioned bitcoin because, even with the complexities of it, it is still easier than dealing with VN banks. That's how hard it is to deal with.
This is not a sound bite at all. More people ARE doing it, you just don't have any personal visibility into it. TONS of viets living abroad send money back and forth all the time. Money remittance is a huge global industry and the existing solutions all suck. KYC and fees are the two general major issues for people who just want to send money to their families.
Expats, like me, have an even harder time. Language and cultural issues often get the in way. If you're a nomad who works online and doesn't have a 'regular' job... you're out of the system and hard for the banking system to deal with. Try walking into a bank where literally nobody speaks english and open an account.
In Vietnam, there is also something that the US doesn't have much of. A black market for funds. I can send USDC to Vietnam and a local there will convert it to VND for a very small fee and zero hassle.
These are all things that based on your comments, don't impact you. That doesn't mean they aren't valid or that the usecase is moot. Try walking in others shoes for a bit before you jump to conclusions about things.
I have to ask: Do you think it's reasonable to expect even 10% of people to set up multiple wallets for all their coins and have a system in place for constant conversion to the fiat currency of where they are for daily transactions? Because you keep glossing over/ignoring this serious sticking point. Setting up a crypto wallet and having your systems in place is not an easy task for most people - especially when most of us go weeks (or longer) without seeing a single vendor who takes crypto. Being your bank is a lot of work and if you forget your password (who does that right?) you lose your money.
>This is not a sound bite at all. More people ARE doing it, you just don't have any personal visibility into it. TONS of viets living abroad send money back and forth all the time.
Do you have any numbers? "More" and "TONS" are, to be blunt, meaningless. And we all know the value of anecdotes.
>Expats, like me, have an even harder time. Language and cultural issues often get the in way. If you're a nomad who works online and doesn't have a 'regular' job... you're out of the system and hard for the banking system to deal with. Try walking into a bank where literally nobody speaks english and open an account.
If you move to a country like Vietnam and don't have a functional grasp of the language, you have way more problems than simply banking. Your expecting to be serviced at a Vietnamese bank while speaking english is the problem, not modern banking. Cryptocurrency does not solve language barriers any better or worse than other currencies do.
>In Vietnam, there is also something that the US doesn't have much of. A black market for funds. I can send USDC to Vietnam and a local there will convert it to VND for a very small fee and zero hassle.
Is this legal? Because this is just saying "crypto is great for violating the law." I'm not saying it's a good or fair system, that legality = moral, but this does not build your case like you think it does.
>Try walking in others shoes for a bit before you jump to conclusions about things.
I don't have a lack of imagination/empathy and find the insinuation a bit insulting. I can see why it's good for you. But to try and fit your very specific shoes on even 10% of the 7bill people on this earth, to graft your needs and solutions on to them and say "this is more convenient and better in most ways," does not make sense to me.
> If you move to a country like Vietnam and don't have a functional grasp of the language, you have way more problems than simply banking.
I did it, don't know the language at all. Spent years driving around on a motorbike in some of the most remote areas of the country, where nobody speaks English and heck, some speak totally different dialects of Vietnamese (there are dozens of the dialects).
Banking really was the toughest thing I had to deal with there. No money, no honey.
> Is this legal?
There are all sorts of money exchange businesses there. It is super common.
> But to try and fit your very specific shoes on even 10% of the 7bill people on this earth,
No, what you're saying is that crypto HAS to be valuable for 10% of the earth in order for it to be useful or valid.
My argument is that it is just for the people who need it.
In Vietnam, the equivalent 'fdic' insurance is about $3k, if you are lucky. Banks also go out of business there, left and right. So when you generalize about the banking system, maybe in whatever your country is, things are rosy, but in so many countries in the rest of the world, things are a huge mess.
These are all things that based on your comments, don't impact you. That doesn't mean they aren't valid or that the usecase is moot. Try walking in others shoes for a bit before you jump to conclusions about things.
Transaction fees are based on volume, and can vary wildly up to $50. And you can't store Bitcoin "in your pocket", you can only store your key, like storing your bank password. Except if you lose your bank password, you don't lose all your money.
I've noticed this pattern with a lot of other crypto-evangelists: you put a lot of emphasis on being able to transact "outside of banks", but most people don't care. They just want convenience, and the safeguards that banks provide are worth it for them.
> Moving large amounts of money 24/7 worldwide, outside of any bank, quickly
But who needs this every day? Most people value security of their money over that kind of flexibility, especially when modern online banking gives you 95% of the same benefits.
Besides, one can tout all the “real” advantages they want, but perception is everything. If people think crypto is a quick way to get stolen from they simply won’t use it. No amount of convenience will get someone to go through the process of setting up a wallet, downloading the ledger, setting up an account on an exchange (which requires them to link a bank account!), and convert their money to crypto. All so they can maybe get some perks a small % care about, let alone need.
I can move $10,000 or less daily, all near-instantly from my computer with my bank. I can’t imagine a world where I need more than that on the regular. That’s something many go years without doing.
Yea I guess this is where you anecdotal experience runs out because there are a lot of busy people and companies out there working in all sorts of industries moving a lot more than 10k around constantly. Banks are an unnecessary middle man not only slowing things down, but taking a a cut out of transactions as well.
Anecdotal? Most people aren’t corporations. Most people have absolutely no need to move over 10k USD in a single day regularly. You can take it at face value, it’s very obvious.
You’re also forgetting that businesses already can. The 10k example was for me as an individual. It sounds like you're saying businesses are currently unable to transfer large sums of money regularly and Bitcoin is their solution. It's very perplexing.
Well I know that I can't pay my mortgage or children's tuition with bitcoin (my two largest regular expenses), I know that transactions actually can take minutes so I don't want to use it to buy coffee, I know that if I forget my password I lose literally every cent in my wallet with no recourse, I know I need to convert it to USD to do 99% of my daily transactions, I know that the price it's at today is not the price it will be at tomorrow with margins much wider and more frequently occurring than with USD, and I know that most people have absolutely no desire to learn how to use it (as evidenced by over a decade of modest adoption and most vendors not accepting it).
> All this does is hurt the reputation of crypto further.
There is exactly one legitimate “crypto”, and it is named Bitcoin. All else ranges from speculative promises about future possibilities (smart contracts etc) to straight up scams.
Don’t let the people abusing the name of “crypto” detract from the greatness that was the invention of Bitcoin.
It seems to me that after more than 10 years Bitcoin can be most accurately described as "an investment vehicle hopefully not correlated with the stock market".
I guess that's fine and nothing out of the ordinary since people constantly invent new financial instruments.
But since more and more trades happen on regulated exchanges and (as was expected) regular financial regulations such as KYC and AML apply it seems not that revolutionary to be honest.
No reasonable person would (or does) use Bitcoin as an actual currency if they expect the value to increase in the future so it can't become a means of exchange for real world goods.
Most of us have established and secure alternatives for that and inflation doesn't really matter for most of my income (which is spent within 30 days). Even people in countries with unstable government mostly seem to prefer other methods.
Maybe I'm missing something but given all that the underlying technology of Bitcoin and friends look like an implementation Detail that doesn't really matter.
> No reasonable person would (or does) use Bitcoin as an actual currency if they expect the value to increase in the future so it can't become a means of exchange for real world goods.
I take issue with this statement because it reflects a fundamental misunderstanding that people have about Bitcoin.
The point is not to “HODL” the Bitcoins waiting for the USD or EUR value of the BTC to increase.
The point is among other things:
1. to be able to freely transact with anyone, and
2. to not have a central authority adjusting the purchasing power of your savings
As of yet we are still relegated to caring about the USD and EUR prices of Bitcoin, because in order to use our savings we have to exchange to fiat. But the ultimate goal is indeed to be able to use BTC directly for everything from buying a house to paying for groceries.
For example, I receive 100% of my paycheck in bitcoin.
From week to week I don’t have any desire that it increases in value of USD or EUR.
My main problem is when it decreases in value, so that my purchasing power is worse from having gotten my paycheck in Bitcoin.
But even then, over time it probably averages out.
And if not, well at least I am still receiving my paycheck in the currency I believe in, and maybe some day more people will believe in it too. And then finally some day I can buy my groceries with BTC directly.
> The point is not to “HODL” the Bitcoins waiting for the USD or EUR value of the BTC to increase.
This is some pretty typical “no true Scotsman” stuff if we’re being honest. If you go to a crypto sub or forum any given day, they will all say “no no no bitcion isn't for daily use, you want ______ coin.” one day. The next day it’s “HODL, DCA in on a few cryptos, and watch it rise.” Two days later when it crashes it’s “I never thought it was good for currency, I just like the tech.”
People tend to forget Bitcoin is a monetary experiment where nobody controls the printer and the total supply over time converges to a certain value. There's no good reason not to try a different model of supply e.g. a supply function that emulates a clock. An asset like this could be named TIME and a coin could represent a second that passed in real life. Valuing time as money would make for an interesting experiment.
There's little illegitimate about a cryptocurrency whose emission averages 1 coin per second forever (not letting the current generation hoard nearly all the supply, or letting the founders get any) and otherwise simplifies many aspects of bitcoin.
That's completely irrelevant. It's not the job of the SEC to guide companies/people on what constitutes securities. Their job is to bring enforcement action if they believe the law is being broken.
If you want legal advice, get a lawyer. If you don't want an expensive court case to determine who is in the right, don't do business in areas without established case law.
I guess the judiciary system will eventually rule on what is legal / not legal via a legal contest, but courts are not actively informing and guiding American companies on what the rules are.
Seems like there should be an agency that does? Furthermore, the SEC does seem to fulfill some of this role, ie. registering securities.
Guess that's how the world works then; do something until the government sues you, go to court and set precedent. Seems a bit inefficient. Or maybe its the most efficient path after all.
USA was doing very well before FTC was created in 1914. In fact, most of American wealth that the US has been riding on, was accumulated before then. Airplane, Ford Model T, etc where all created before then.
The very next paragraph goes into specific details wrt/ how Celsius allegedly lied to their clients.
"The agency said Celsius engaged in "risky trading practices" and made uncollateralized loans, despite telling investors that it did not. The company also falsely claimed to have raised $50 million from selling its token, and claimed to have 1 million active users when in fact it had only around 500,000 depositors, many of whom were no longer active, the SEC said."
Securities or not, selling something while knowingly lying to buyers about what it is they are purchasing is fraud.
Mashinsky is a conman. This has nothing to do with the SEC being coy about whether BTC is a security and everything to do with Mashinsky lying to his customers about the risk involved in investing through Celsius. Here's a clip of him getting called out on his lies in a debate with a Bitcoin hater:
US v Mashinsky: https://storage.courtlistener.com/recap/gov.uscourts.nysd.60...
SEC v Celsius: https://storage.courtlistener.com/recap/gov.uscourts.nysd.60...
FTC v Celsius: https://storage.courtlistener.com/recap/gov.uscourts.nysd.60...
CFTC v Celsius: https://storage.courtlistener.com/recap/gov.uscourts.nysd.60...