but it's not the full story...put simply, if most tokens are securities and AMMs are securities exchanges, then essentially all current token transactions are illegal, whether informed or uninformed
there is no current way to register any smart contract system with the SEC as a securities exchange
even if you could, it would automatically be violating the exchange requirements, as it cannot KYC its users, reverse transactions, etc.
in other words: a government-regulated disclosure regime relating to crypto technology risks would, in my opinion, be a wonderful thing...but it has to work without simply killing the technology...the non-disclosure parts of the securities laws would kill current tech
even some of the disclosure parts of the securities laws would need adjustment to work
don't take my word for it, read this post-mortem by a team that actually tried to register their tokens and become an SEC reporter
no, letting a multi-billion-$ financial system develop for years with little guidance & then crashing it with a sudden politically motivated 'crackdown' is a "threat to the financial system"
Gensler speaking at @EP_Economics on crypto:
-repeats they are very focused on "platform" (exchanging, lending), "whether centralized or decentralized"
-repeats crypto can be a "catalyst for change";
-repeats he is "technology neutral"
-repeats that tech innovations in finance do not thrive unless brought under "public policy goals" incl. "investor protection"
-notes that DeFi platforms remove broker-dealers, therefore it is incumbent "on the platform" [?] to provide broker-dealer-style protections
-notes they are also very focused on "stablecoins"; says primary purpose of stablecoins is to 'sidestep public policy goals. . .such as AML and tax reporting'
some are even more decentralized than I thought & rapidly decentralizing more
don't know what regulators will argue; that it's illegal to create an incentive system that gives rise to a transactional network as an emergent phenomenon?
or maybe that a website can itself be a securities exchange, futures exchange, etc.?
but you realize what that means right?
you can perform the same transactions and get the same info from etherscan
is a block explorer website also a securities exchange?
makes no sense
I think all regulators can do is:
(a) argue governance tokens were securities at some point & get Section 5 liability from founding team
(b) use 'cui bono' logic to say someone who benefits a lot should be liable as an exchange operator, even if they don't operate the exchange
one takeaway from Gensler's recent remarks as well as this action is that the SEC is going to argue APYs / APRs are "promises"
every single DeFi front-end would do well to adjust how it is talking about them & add in-your-face disclaimers and nuance
a lot of us (@collins_belton, @propelforward, et al) discussed for a long time that there are securities other than investment contracts and tests other than Howey; SEC is now broadening its approach to encompass tokens-as-debt-securities for DeFi