Earlier this week, Jake Chervinsky, executive vice president and current policy director of the Blockchain Association, Variant Fund consultant, member of the Board of Supervisors of DeFi Education Fund, and Rodrigo Seira and Amy Aixi Zhang, consultants and policy consultants of the Paradig Login Password, denied the statement that "betting somehow makes ETH a security"

On September 15, 2022, Ethereum was jointly updated, that is, the day when the work unit certificate (PoW) was converted to the equity certificate (PoS), Michael Saler, the co-founder and director of MicroStrategy Inc. (Nasdaq: MSTR), a business intelligence software company, implied that the United States could classify Ethereum dollars as securities (not products). Securities Trading Association (SEC).

After the merge update of Ethereum ended in the morning of September 15, many popular BTCmaxis expressed their reaction to this event.

Saylor is a BTC tycoon (that is, in his opinion, BTC is the only legal and compliant digital currency, except for the stable loan currency specified by law, such as Tether (U.S. dollars)). With regard to the recent message from Gary Gensler, the current chairman of the SEC, on PoS digital currency, he sent a Twitter message, indicating that he hoped that the SEC would finally announce that the U.S. dollar ETH is a kind of securities (different from the U.S. dollar BTC they announced as a product, so it will not be subject to the U.S. securities method).

Saylor mentioned in the article that the Wall Street Journal (WSJ) reported that, according to the SEC, "the large software upgrade of Ethereum on Thursday may have turned the second largest digital currency into a security". According to the report of the Los Angeles Times, although Gensler did not mention Ethereum too much, he said yesterday that the local property of PoS blockchain technology is likely to be tested according to Howell, because it is likely to be regarded as an "investment contract", because "project investors are based on others' diligent expectation of profits."

The following is how Investopedia explains Howey detection:

Howey test refers to the case of the Supreme People's Court of the United States, which is used to determine whether the sales meet the "investment contract", so it will be called securities, and comply with the provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 on publication and application for registration. According to Howey's experiment, if "you invest cash in an ordinary company and reasonably expect to make a profit in your struggle, there is an investment contract."

The next day, Chervinsky joined the Blockchain Association in Washington, D.C., the headquarters of the company. This research association means "a famous manager in the blockchain technology and digital currency industry in the United States". This person is a member of the General Council of the Composite Laboratory. In order to protect the change of consensus from Ethereum to PoS, Twitter answered why some people may still remember why Collaborate did not change $ETH from product to security.

Chervinsky continued:

The general idea may be "If you squint, chips look like dividend distribution or loan interest, and some specific securities also have dividend distribution or loan interest. Therefore, chip property may also be securities." Laws and regulations do not work this way. This only means that those who own risky assets expect to make profits

This alone will not be able to convert property into securities. The profit forecast is only one of the four detection indicators of Howell, which may be the most critical to the uncertain property (that is, non stable loan currency). Everyone owns all kinds of property for profit. Gold, cars, watches, etc.

That is to say, profit forecast is the feature of all project investment products, not just securities. Whether the income is generated by market price rise, bet reward or any other system, it is irrelevant to securities analysis.

Soon after, he further emphasized that Hepin was not a mistake, but a victory for Ethereum, because he reduced the good opportunity for the American Securities Trading Federation to classify Ethereum as a security:

On October 5, Rodrigo Seira, Amy Aixi Zhang, and Jake Chervinsky published a learned article entitled "Ethereum's new 'charge' entity model cannot make Ethereum a security", Answered why "Ethereum has not made Ethereum (or even charged Ethereum) an investment contract by choosing the equity certification consensus mechanism, which may lead to the meaningless use of securities methods.

They first mentioned the Hoy test:

The Securities Law of 1933 listed one kind of means to constitute "securities", mainly including "investment contract", as defined by the pioneering proposal of the Supreme People's Court in Howey case, "investment contract" must (1) cash investment; (2) In an ordinary enterprise; (3) Reasonable expected profits; (4) Completely comes from the diligence of others. In order to achieve this definition, the contract, plan or sale must meet four requirements.

Later, they discussed the application of Hoy test in Ethereum betting again:

Ethereum has used the equity certification consensus mechanism, which also makes many current affairs commentators think that ETH, or more specifically, ETH's betting personal behavior, can meet the definition of Howell's investment contract. The argument for this argument is based on the following structure: taking ETH as the verifier's bet conforms to Howell's test, because the verifier is (1) the "capital" of investing 32 ETH shares according to the lock, (2) in the "joint company" composed of many parties participating in the certification process, (3) expects the following incentive method to be profitable, and (4) the diligence of other certifiers and many parties participating in the whole certification process.

Aside from whether the verifier's deposit of Ethereum into the blockchain smart contract meets the qualification of "cash investment", the statement that Ethereum is called a project investment contract due to its selection of equity certificates misunderstands the second and fourth levels of Howell from the source, and the failure of any level is fatal. This result will also lead to the absurdity and unnecessary use of the securities method, because no foreign investors or initiators can or should have to publish the information content.

These people said on the results of the article, "Analyzing the actual economic development of ETH on the Internet of Ethereum's equity certificate, the people's court should be aware that the equity certificate cannot meetOmnivision Testing, if there is no "universal company", the verifier never depends on "others' diligence" In addition, they also mentioned that "there is also a problem whether the deposit of ETH into equity meets the qualification of" cash investment ". They also mentioned that "we cannot meet any of the four standardsOmnivision Prongs will represent that the sale is not an investment contract, and therefore not a securities sale. "

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