"Security" is a word that has been thrown around crypto space for the last few years and especially when I was getting started I had no idea what a "Security" was. The fact is its imperative that I explain it because I have a feeling that its going to get used a lot more in the next few months.
To classify something as a security it has to meet 4 criteria:
1. There’s an investment of money
2. The investment must be in a joint enterprise
3. There must be an expectation of profit
4. The profit must be obtained through the effort of others
The reason Bitcoin and some of the other REALLY big names in crypto haven't been sued yet is because they are not classified as securities. For example, bitcoin is not reliant on any one company to determine its price because it only has the value that investors give to it. If tomorrow everyone lost interest in bitcoin it would be worth $0. However, for a crypto like KCS (The native token of KuCoin) if the platform does well the token also does well making it reliant on the effort of the KuCoin officials.
What about stable coins? Stable coins, again, have to meet the 4 criteria. So for a token like Tether who's price is reliant on real life holdings of USD (in a 1:1 ratio) they would not be classed as a security. But, the SEC decided to rule Binance's BUSD as a security. Why? The SEC never publicly announced why but its most likely to do with Binance controlling how many tokens are in supply, when and where to distribute these tokens and more.
Why know what a security is? Well, that's the reason that a lot of SEC lawsuits are taking place are because the companies are trading "unlicenced", "unregistered" and "unsafe" securities.
Until next time Happy Cryptoing!
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This is was not intended to be investment advice! The article you have just read was written by an incompetent fool. Please always double check the facts and do your own research.
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