The Time Has Come For The SEC To Say That Bitcoin And Its Look-Alikes Are SecuritiesJul.4, 2016 7:31 AM ETSummaryCrypto-currency buyers need the protection of the securities laws.Finding that Bitcoin is a security will not prevent legitimate uses of the technology.The SEC should conduct a rule-making procedure to give all parties an opportunity to be heard.The question of whether Bitcoin is a security for purposes of the U.S.securities laws has been around since the so-called crypto-currency first came on the scene.Regulators have been reluctant to decide that issue because, on the one hand, they see that people buying Bitcoin are reacting as victims of Ponzi schemes typically do, while on the other hand, the proponents of Bitcoin and its progeny argue that Bitcoin is a currency and that to restrict or regulate it would hold back important technological progress.The regulators have been right not to rush in.A few years of experience while some people are hurt is worth the wait to see what really is going on.

But now, the time has come to pull back the veil of technological mumbo jumbo and call a spade a spade.Bitcoin, Ethereum, Ripple and all the rest are securities.Who issues them, who underwrites them, who controls them, who aids and abets whomever else are subsidiary questions that, no matter how difficult, should not make the regulatory world shrink from saying that such investment contracts are securities.bitcoin kosovoWe can see now that investors do need protection.litecoin 25 blockWe can see now that these are primarily investment vehicles, not transactional currencies.bitcoin miner for sale south africaAnd we can see now that the technology that supports the crypto-currencies - blockchain - is the critical element, and that it can be utilized in regulated as well as unregulated forms.set up bitcoin-qt

The question of whether a thing such as Bitcoin will be deemed to be a security will be judged, absent new legislation, under the Howey test.The Howey case was decided by the U.S.bitcoin brain damageSupreme Court in 1946, and it is surprising that we would be applying such a hoary precedent 70 years later, but the Howey test has proved to be flexible enough to accommodate the imaginations of promoters and scoundrels, as well as the vulnerabilities of greedy, complaisant investors.bitcoin minimum payoutMy purpose in this article is not to argue the legal niceties of how the Howey test should apply to Bitcoin and its progeny - that is dealt with quite well (though with the wrong conclusion) in an article from earlier this year: "Is Bitcoin a Security?"by Jeffrey E. Alberts and Bertrand Fry, members of the Prior Cashman law firm (whose founder Gideon Cashman was a friend of mine), which I would guess has clients with an interest in the outcome of the question (that is the usual nature of articles by law firm partners).

A court could come out either way under the Howey test.It is flexible enough that the case legitimately could go either way.The question is, as a matter of public policy, which way should it come out, given that relative ambiguity on the technicalities?As I said, we now can see that people are buying Bitcoin and its progeny primarily in the hope of gain, not for the purpose of utilizing a steady value medium of exchange.Those buyers need the protections of the securities laws, just as they do when making other investments.Gox fiasco, the more recent Ethereum fiasco (see Kurt Dew's interesting article here), and the domination of the Bitcoin market by operatives in China (where the government could do almost anything by fiat) (see here) all show that investors need protection.We also can see that the financial world is moving in the direction of transparency rather than secrecy, and the secrecy associated with crypto-currencies is in fact a liability rather than a virtue.See, for example, the many recent stories about Panamanian secrecy and the global reaction to its disclosures.

We also can see that the virtues of virtual currencies can be achieved by recognized institutions, which can utilize the blockchain technology and its offshoots to reduce transaction costs and increase transaction speeds in numerous financial and business applications that would not be affected at all by deciding that Bitcoin and its look-alikes are securities.Whether the SEC has the guts to take the inevitable heat from the many interested parties, I do not know.But the time has come for a rulemaking procedure that gives all parties a chance to be heard.I have a bias in how that rulemaking should come out, but the process should be open and transparent.It should begin promptly.It should come to a conclusion within a reasonable period of time, and (probably after court challenges) it should clear the air and provide relative certainty to innovators of all kinds as to what they have to do in order to comply with the law.The SEC should not worry about who will be designated issuers, underwriters, aiders and abettors or whatever.

Once the security definition has been made, it will be up to market participants to decide what they should do in order to comply with the law.The fact that such decisions may not be straightforward because of the unique structure of some of the crypto-currencies should not stand in the way of the SEC finding that they are securities.Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.I wrote this article myself, and it expresses my own opinions.I am not receiving compensation for it (other than from Seeking Alpha).I have no business relationship with any company whose stock is mentioned in this article.Bitcoin has generated a ton of buzz the world of cryptocurrencies, but it's not the only option.We've compiled a list of the top alternatives, including open source services, payment systems and digital currencies that can be exchanged for traditional money.SEE ALSO: 7 Ways Companies Are Using the Government's Open Data 1.

Litecoin Litecoin is derived from Bitcoin's open source code, but has a faster block rate — two and a half minutes, compared to Bitcoin's 10 minutes.However, the two currencies are very similar structurally.Ripple Ripple is a currency as well as a payment system.It can be used to transfer any kind of currency, so you can use it to move anything from Bitcoins to Yen.It was launched by Chris Larsen's OpenCoin company in 2012, which is now backed by Google Ventures, Andreessen Horowitz, FF Angel LLC, Lightspeed Venture Partners, Vast Ventures and Bitcoin Opportunity Fund.Ripple allows you to easily transfer or convert any kind of currency with a minimal transaction fee of $0.0001; a Ripple credit is called an XRP.Its public ledger is similar to Bitcoin's blockchain, but uses a consensus process to verify transactions.David Meyer of GigaOm exposes a couple of key weaknesses in the Ripple network.For example, if a currency is backed by a for-profit company, can it ever truly be trusted?

OpenCoin OpenCoin is an open source digital cash project that started in 2007.The project aims to create an open source version of the electronic cash system invented by David Chaum; Chaum, who invented a series of cryptographic protocols, is attributed with developing secure digital cash in 1982.Many of his ideas inspired the technical basis for the 1980s Cypherpunk movement, which is founded on the belief that cryptography should be used as a route to social and political change.MintChip In April 2012, Bitcoin Magazine called MintChip "the Canadian government's answer to Bitcoin."MintChip is run by the Royal Canadian Mint and isn't actually a digital currency; rather, it's the digital equivalent to a fiat currency, the Canadian dollar.Personal identification isn't required to use the currency, and customers can exchange MintChip through person-to-person transactions.Linden Dollars Linden Dollars is the primary form of currency in Second Life.It's not necessarily an alternative to Bitcoin, but can act as another form of digital currency exchangeable for fiat currency, like dollars or Euros.