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Are cryptocurrencies securities?

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There is a huge debate around whether cryptocurrencies are securities or not. Should they be regulated by the Securities and Exchange Commission (SEC) or not? This has come to a head recently, as the SEC decided to tackle Ripple and Coinbase as deviants.

But this is nothing new. There have always been issues between those who are regulated and those who are not.  It is a constant battle between authority and liberty; government and governance; structure and anarchy.

And then, what happens, is that those who want to evade or avoid governance find ways to escape. We see this everywhere with tax avoidance, and even banks and governments use offshore firms to do this, so now we see this with cryptocurrency.

For example, as the US government probes and questions deeper and deeper into crypto operations, the more we see alternative places opening for crypto operations.

The issue here is trust, certainty and governance.

Who do you trust? What is certain? How do you govern?

This is the argument that Ripple, Coinbase and others are having with the Federal Reserve and the SEC but, underlying all of these discussions is the questions at the core: Who do you trust? What is certain? How do you govern?

These are fundamental questions at the heart of finance and life. Can I rely on you to look after my money? Can I rely on you to reimburse me if it is lost?

The answer for most banks is yes. Because banks have a license from a government and guarantee they will cover any losses, you can trust banks to look after your money. You may not like them, but you can trust them.

When it comes to cryptocurrencies, the world is far more fuzzier. Who can you trust and why?

Personally, I’m far more comfortable with Ripple and Coinbase than with Dogecoin or Shiba Inu. Why? Because the former do work actively with governments to try to create a regulated cryptocurrency marketplace, whilst the former have no management or organisation to do anything of such nature.

And I guess this si the core of where I would argue between centralised versus decentralised.

First, is there a management board behind the investment you are making? Second, can you contact them? Third, is it clear how you can get your money back? Fourth, who is their guarantee, their regulator, their oversight? If you cannot answer these questions, should you really feel confident about giving them your money?

A little bit like buying something on eBay or similar, if you don’t know the provenance, should you do it? By way of example, I’ve purchased quite a few autographed documents over the years and then, later, discovered they are fake. In a similar way to money, if there’s no provenance, there’s no trust.

Meanwhile, coming back to whether cryptocurrencies are securities … well, security requires trust and if there’s no trust, there’s no security.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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