(Disclosure: I am not a lawyer, nor do I have any formal education in law-related fields. I am a software developer, so take anything stated here with a grain of salt)
FinCEN came out with some definitions and regulations back in 2014. Some of the most important parts of that document are:
- "FinCEN's regulations define currency (also referred to as "real" currency) as “the coin and paper money of the United States or of any other country that [i] is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance.”"
- "In contrast to real currency, “virtual” currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction."
- "The guidance addresses “convertible” virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency."
- "An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency. An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency."
- "The guidance makes clear that an administrator or exchanger of convertible virtual currencies that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency in exchange for currency of legal tender or another convertible virtual currency for any reason (including when intermediating between a user and a seller of goods or services the user is purchasing on the user’s behalf) is a money transmitter under FinCEN's regulations, unless a limitation to or exemption from the definition applies to the person."
However, if we look at "Statement of facts and violations":
- "From at least March 6, 2013, through April 29, 2013, Ripple Labs sold convertible virtual currency known as “XRP.” "
I don't know about you, but the last time I checked XRPs were a free market currency like Bitcoin (minus being "premined" and mostly owned by a single entity). This might indicate that any virtual currencies sharing the characteristics of XRPs might be under scrutiny soon...
Token IPOs - are the days numbered?
In our short crypto history, there have been a few notable token presales / IPOs (and a lot more less notable ones). We had:
All of those presales have been done in a similar fashion - people could freely send their coins to a given Bitcoin address and they would in turn receive the tokens they paid for. Fast, easy and hassle-free - an elegant solution for the Internet age.
Now, imagine if those companies had to account for every token sold and verify each of their customers. People would have to sign up for some services, verify their identities and so on. In essence, an elegant presale would turn into something akin to going onto an exchange - more centralized and not as frictionless.
So the question remains - are those tokens virtual currencies, or convertible virtual currencies? If the former, the presales might continue unhindered. If the latter - the current IPO model might need to change...
Whether you like or hate Ripple Labs, there appears to be much more at play here than just the fine imposed on one company.