Blockstack may have successfully transformed its STX token, registered as a value, into a commodity.
Blockstack may be about to go where no token has gone before, by transforming from a value to a non-value, at least as far as US regulators are concerned.
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In a blog post on Monday, Blockstack CEO Muneeb Ali published a legal memorandum in which the company argues that its tokens Stacks (STX) will no longer qualify as securities once the new block chain is launched. The firm predicts that Stacks Blockchain 2.0 will be active „in late 2020 or early 2021“.
But what does this new blockchain have to do with Bitcoin Loophole value law? Blockstack made its initial coin offering under an exemption from the Securities and Exchange Commission, under which Blockstack registered information about its tokens and operations with the SEC, but was also prevented from trading freely within the United States.
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The idea behind the values is that they are based on the efforts of a third party and are therefore more subject to potential manipulation or fraud than commodities such as oil, corn or, indeed, Bitcoin, whose value is not overwhelmingly dependent on the actions of one party. The Howey Test is the usual means of determining what an „investment contract“ is, which is the label under which most tokenised securities fall.
According to Blockstack’s presentation, he believes that the new block chain will prove to have met this test:
„PBC has previously stated its intention to make the tokens stop being values as soon as reasonably possible by making the functioning of the Chain of Blocks and the Stacks ecosystem sufficiently ‚decentralised‘, i.e. sufficiently dependent on the efforts of a large number of miners, node operators, wallet providers, application developers and others, that neither PBC nor any other person or entity can be considered as a provider of the essential management services that could make the Tokens Stacks securities under the Howey Test“.
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The problem of tokens that the SEC considers to be securities has bothered issuers of crypto tokens for years. SEC Commissioner Hester Peirce has highlighted the need to create a reliable regulatory framework that allows companies to develop decentralised networks that can start in a more centralised way. Ethereum, for example, had a pre-sale of Ether tokens (ETH) in what would probably have qualified as a securities offering if it had not come into play so soon, but is now largely regulated as a commodity.
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Cointelegraph contacted the Blockstack team but did not receive a response by the time of this publication. This article will be updated if we receive a response.