I spend several hours every day consuming crypto data and information. Only a fraction of that time is spent looking at prices though. I’m much more interested in bigger picture items like use cases, regulatory frameworks, inflation, monetary policy and other macro issues.
As I was reading up on Ripple’s partial victory over the SEC, I found a thread on Twitter that sums up my thoughts nicely.
Sina Kian, the COO and GC for Aleo, does a terrific job explaining investment contracts — and how crypto doesn’t neatly fit into that box. But my favorite part of the thread is the fancy chair analogy.
Consider a hypo. You want to start a fancy chair company. Your first investors is a furniture co that says “we will invest in exchange for 20% of your first year chairs.” You say deal. Later you give them 20% of first year chairs, while also selling chairs to the public.
There, it is obvious that you are in an investment contract with the furniture co but not the buying public (even if they are buying on speculation of your chairs getting more expensive). The judge correctly recognized in Ripple that these sorts of facts and nuances matter.
This analysis highlights how crypto raises new and interesting questions of law and policy, and that *even if* you’re extremely skeptical of crypto’s usefulness, merely saying “they are securities” does not really address all the things you might be concerned with.
The fancy chair analogy is a perfect crystallization of why we need NEW regulations for crypto. It’s a new asset class that can be a security in one instance and NOT a security in another instance. Any regulatory scheme that doesn’t acknowledge that basic fact is a regulatory scheme that doesn’t work.
I encourage you to read Kian’s entire thread. It’s filled with super sharp analysis that’s easy to understand. And that understanding will help you become a better crypto investor.