The Government's Definition of Crypto Asset, Blockchain, and Smart Contracts
by SEC vs. the WorldOctober 6th, 2023
Too Long; Didn't Read
The SEC defined crypto assets, blockchain, and smart contracts during the trial of SEC v Terraform.People Mentioned
SEC v. Terraform Court Filing, retrieved on February 16, 2023, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This is part 7 of 38.
BACKGROUND ON CRYPTO ASSETS
26. The term "crypto asset" generally refers to an asset issued and/or transferred using distributed ledger or blockchain technology, including assets sometimes referred to as "cryptocurrencies," "digital assets," "virtual currencies," "digital coins," and "digital tokens."
27. A blockchain or distributed ledger is a peer-to-peer database spread across a network of computers that records all transactions in theoretically unchangeable, digitally recorded data packages. The system relies on cryptographic techniques for secure recording of transactions. Blockchains can also record "smart contracts," essentially computer programs designed to execute the terms of a contract when certain triggering conditions are met.
28. Blockchains typically employ a consensus mechanism to "validate" transactions, which, among other things, aims to achieve agreement on a data value or on the state of the ledger. Crypto assets may be traded on crypto asset trading platforms in exchange for other crypto assets or fiat currency (legal tender issued by a country).
29. A blockchain "protocol" is a code, software, or algorithm that governs how a blockchain, or a feature of a blockchain, operates.
30. On July 25, 2017, the SEC issued the Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, advising "those who would use... distributed ledger or blockchain-enabled means for capital raising[] to take appropriate steps to ensure compliance with the U.S. federal securities laws," and finding that the offering of crypto assets at issue in that report involved investment contracts and, therefore, securities. In analyzing whether something is a security, "form should be disregarded for substance," Tcherepnin v. Knight, 389 U.S. 332, 336 (1967), "and the emphasis should be on economic realities underlying a transaction, and not on the name appended thereto." United Housing Found., Inc. v. Forman, 421 U.S. 837, 849 (1975).
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This court case 1:23-cv-01346 retrieved on September 12, 2023, from sec.gov is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction.
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