Both Samani and Hinman agree bitcoin and ethereum are examples of this latter type of digital asset and thus are not securities. In Hinman’s exact words:
“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.”
Hinman also released a list of questions to help distinguish security tokens from a utility. It should first be assessed if the promoters are playing a significant role in the project or if they hold a significant amount of tokens — as in, a majority of them. In cases where promoters raise too much money than what necessary, it is important to hold the team accountable. If no explanation is given, there should be a red flag raised somewhere, he said.
Join in on the conversation with Alex Masters Lecky when you subscribe to CRYPTONICLES.