Coins vs. Tokens: Why the SEC Decision is a Step in the Right Direction
By Zach LeBeau, CEO of SingularDTV
Looking back on the incredible journey SingularDTV has taken with the #BestofSingularDTV Series. This article was published on July 26th, 2017.
The SEC’s announcement that the DAO issued securities via its token is a step in the right direction. It will lead US regulators to better understand the cryptosphere and how to accurately categorize the different structures and activities that take place here. To come out against the DAO before other entities reflects a lack of understanding of what a token is — or could be — but serves as the beginning of their education into the technical differences between a coin and a token, because that’s what this will come down to ladies and gentlemen, coins vs. tokens. Of course lack of proper auditing and launch procedures, as well as how the DAO token was structured, made them low hanging fruit for regulators.
For the SEC to claim tokens as securities means that BTC and ETH — all crypto — are or can be considered securities. After spending large sums of money on various law firms and hiring a lobbying group in DC, SingularDTV has a unique understanding of the regulatory landscape in the United States. It is an influencing factor as to how and why we devised SingularDTV’s Economic Model.
SingularDTV is very fortunate to be a regulated enterprise organized in the most decentralized nation on the planet, Switzerland. It’s the perfect headquarters for our fiscal and administrative operation. SingularDTV devised its structure hand-in-hand with Swiss regulators via crypto valley law firm MME. It’s this kind of cooperation between government agencies and the private sector that allow for innovation and progress while at the same time instituting regulatory framework in the most organic and efficient way. One of the most innovative structures to come from this collaboration was SingularDTV’s CODE — our Centrally Organized Distributed Entity.
As mentioned above, we have hired consultants and lobbyists in DC to help with a strategy to advise and educate policy makers on Capitol Hill as to what a token is and what’s the difference between coins and tokens. There are even major differences between tokens and other tokens that can make or break economic models and enterprises. What it will all come down to is the functionality tokens and coins possess. Of course coins don’t have multi-functionality. In fact, they really only have one utility — to act as simple stores of value. Easy for the SEC to claim as a security when coins are used in ICOs or investment schemes. By “simple” value, I mean value not represented or manifested through a variety of dynamic functions. But tokens are a completely different breed all together. They can store complex, multi-faceted levels of value and can be programmed with various functions. They transcend being just a coin, and through their array of functions become something much more. You can read about the Difference Between Coins/Tokens and ICOs/Token Launches here.
The SNGLS token is a good example of what I mean by “much more” and how a token can transcend the antiquated definitions of a security. Remember ladies and gentlemen, the SEC bases decisions on what a security is through the Howey test established circa 1946. Today is a new world. We in the center of the cryptosphere know it and of course the SEC knows it. We’re looking forward to a more progressive policy being instituted in the coming years by US regulators. Too many Fortune 500 companies are conducting blockchain research and development now for it to be ignored, and the United States wants to remain competitive in all ways with China and Russia, so it’s inevitable regulators and policy makers will figure out some way to allow innovation to flourish and keep pace with competitors.
To break down some of the evolutionary functions of the SNGLS token, it is important to note that they are multi-faceted property, utility, and reward mechanism tokens that adhere to the rules and guidelines of a very specific economic model.
- Property: SNGLS are an expression of IP inside a programmable token. The IP SNGLS represent is derived from SingularDTV’s proprietary content — the modules/apps and original entertainment content we produce.
- Utility: SNGLS is also a utility token in the sense that you need SNGLS to operate many of the modules/applications in the SingularDTV ecosystem. Additionally, when Ethereum’s protocol is upgraded to allow for tokens to be the gas that pushes transactions through the network, the SNGLS token will achieve absolute utility.
- Income/Rewards: SNGLS manage the flow of income and rewards generated through consumption and participation in the SingularDTV economy that are distributed to token holders. It is our rewards model that has been carefully crafted with the primary function of withstanding scrutiny from regulators.
Technically and by the letter of the law, tokens can be less like securities compared to BTC and/or ETH in the way they act and operate. Taking it one step further, some tokens won’t qualify as securities because of their functionality and economic models. It will take time and energy to educate policy makers on the difference. Ultimately, I’m certain the SEC and US regulators will consider ICOs and coins as securities and move to aggressively regulate those coins and structures. But I also believe that multifunctional tokens with the right economic structure will not be put in the same category as coins. Token launches too — which are actually Token Generation Events (TGEs) — will also be allowed to flourish.
It’s an exciting time to be pioneering in the blockchain space. The moves we make together as a community will ultimately set the course of blockchain’s future and serve as the example to help update regulatory policy and bring it into the 21st century.
Zach LeBeau, CEO of SingularDTV