Ep 29 - What are Securities vs. Utility Tokens? Featuring Joe Ciccolo, CAMS, AMLCA, CFE and founder of BitAML

In today's episodes, we are going to explore some of the
complexities of a Security vs. Utility token which are fresh on
our minds after the recent SEC announcement about Ether and
Bitcoin not being considered securities.


William Hinman, the SEC's Director of Corporate Finance made the
announcement:


“Strictly speaking the token, the coin, whatever the digital
information packet is being called all by itself, we don’t
think is a security. Just as oranges in the Howey case were not
securities. Essential to determining whether a security is being
offered, however, is how it’s being sold and a reasonable
expectation of purchasers.


When someone buys a housing unit to live in it’s probably not a
security but under certain circumstances, the same asset could be
offered and sold in a way that could cause investors to have a
reasonable expectation of profits based on the efforts of others.


If the housing unit is offered with a management contract or
other services where purchases are encouraged to invest rather
than reside, it could be a security. Case law tells us that,”
Hinman explained during his speech.


Securities are the talk of the regulator town and perhaps less so
in the Cryptosphere's now that we have a solidified answer.
However, many other projects have uncertain futures as to their
designation which may bring pause to would be Blockchain empire
builders.


The Street, a finance-focused media outlet, defines
securities as follows:


"A simple definition of a security is any proof of ownership or
debt that has been assigned a value and may be sold. (Today,
evidence of ownership is likely to be a computer file, while once
it was a written piece of paper.) For the holder, a security
represents an investment as an owner, creditor or rights to
ownership on which the person hopes to gain profit. Examples are
stocks, bonds and options.


The Securities and Exchange Act of 1934 provides this more
complicated definition, but you might want to grab a cup of
coffee: "The term 'security' means any note, stock, treasury
stock, bond, debenture, certificate of interest or participation
in any profit-sharing agreement or in any oil, gas, or other
mineral royalty or lease, any collateral-trust certificate,
preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of
deposit, for a security, any put, call, straddle, option, or
privilege on any security, certificate of deposit, or group or
index of securities..."


To help us demystify this fascinating (yet complex) situation of
Securities vs. Utility tokens we brought in Joe Ciccolo, an
expert in building BSA/AML programs as well as over 10 years of
banking compliance.


Joe founded BitAML, a regulatory compliance advisory group, to
help Blockchain startups and innovators to remain above
board in a rapidly shifting (and uncertain) regulatory landscape.


For show notes and more visit: LAB Radio