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@lex_node @JoshuaZeidner @jerrybrito 1/ Thanks, @lex_node. There’s actually a fair amount to unpack here. First, it’s important to bear in mind that the definition of “security” in Securities Act sec.2(a)(1) is much broader than just “investment contract”.
@lex_node @JoshuaZeidner @jerrybrito 2/ Also included in the “security” definition are “collateral-trust certificate” and “any certificate of interest or participation in ... any of the foregoing”. Moreover, if tokens were not involved, we would say many “stablecoins” look a lot like asset-backed securities ...
@lex_node @JoshuaZeidner @jerrybrito 3/ ... because they would represent an instrument backed by a managed pool of financial assets. AFAIK, the absence of interest payments does not ipso facto make an instrument not a security.
@lex_node @JoshuaZeidner @jerrybrito 4/ Under the Reves “family resemblance” test, such an instrument looks a lot like a “money market fund”. In fact, given our recent bout of negative interest rates on bank deposits, an equivalent instrument that simply returns principal at a later date w/o a fee wd be valuable.
@lex_node @JoshuaZeidner @jerrybrito 5/ Also worth examining is the definition of “investment company”. Section 3(a)(1)(C) of the ‘40 Act defines any company, more than 40% of whose assets are “securities”, as an “investment company”.
@lex_node @JoshuaZeidner @jerrybrito 6/ Of particular note is that the term “securities” in the ‘40 Act is much more broad than in the ‘33 Act, and basically includes any sort of evidence of indebtedness. Even a bank deposit could be considered a “security“ for ‘40 Act purposes.
@lex_node @JoshuaZeidner @jerrybrito 7/ As was mentioned in the clip of today’s hearing, any determination regarding the securities law status of a stablecoin will be made on the facts and circumstances basis.
@lex_node @JoshuaZeidner @jerrybrito 8/ My only point is that, for many “stablecoins” I do not believe that the securities law analysis is nearly as simple as saying “no interest so fails the Howey test”.
