Cryptocurrency regulation

50% of Top 10 Crypto’s Can Be Classified as Securities, says Crypto Hedge Fund Exec

Multicoin Capital is a crypto hedge fund and its Managing Partner, Kyle Samani, has used the recent statements by the SEC Director of Corporate Finance, William Hinman, to further analyze the top 10 cryptocurrencies as to whether they make the cut of Hinman’s definition of a security.

In a 17 part tweet, Kyle Samani came to the conclusion that the following cryptocurrencies are securities:

  • Ripple (XRP)
  • Stellar (XLM)
  • Tron (TRX)
  • Cardano (ADA)

Samani highlighted the following from the statement issued by Director Hinman to prove his argument:

If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract.

Samani zeroed in on the last statement of:

where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts.

With the above statement, Kyle Samani came to the conclusion that the coins of XRP, XLM, IOTA, TRX and ADA qualify as being securities. All these projects have the founding companies holding a vast majority of the tokens.

In the case of Ripple, the organization is known to be HODLing some XRP in escrow, giving some of it away as well as selling some XRP in the markets when needed. Samani stated that the Stellar Foundation owns over 90% of the coins making it a security. The same applies to IOTA and TRX. The only reason ADA made the list as a security is because the platform is not truly decentralized yet and that nobody knows how many ADA the Cardano Foundation owns.

With respect to Bitcoin, Bitcoin Cash, Litecoin, Ethereum Classic and EOS, Samani used the above argument to quickly declare them as NOT being securities. In the five coins, no single founding entity owns a vast majority of the coins. Plus the mining/block production characteristics of the 5 platforms, furthers decentralization on the individual networks.

He also gave some advice to the EOS community when he said:

EOS – only 1 implementation. B1 owns 10% of tokens. B1 clearly did not launch the chain. If I were B1, I’d encourage the community to build another EOS implementation. This, combined with the fact that BPs clearly are independent businesses, could make EOS a utility quickly

Samani would end his twitter thread with the following comments:

The next few months certainly will be exciting!

This indicates that the five coins of XRP, XLM, MIOTA, TRX and ADA might find themselves being classified as securities by the SEC and constrained by regulation. Such an event is sure to cause some shock-waves in the crypto-verse.