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After Bitcoin [BTC] ETF silver lining, SEC puts forth circular on ICOs

Akash Anand

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After Bitcoin [BTC] ETF silver lining, SEC puts forth circular on ICOs
Source: Unsplash

The Securities and Exchange Commission [SEC] of the United States of America has been a major factor in the acceptance or denial of cryptocurrencies in the country. The body has intervened in several developments and updates, citing regulations and laws that will be a key component in pushing cryptocurrencies such as Bitcoin [BTC] into the mainstream realm.

In the latest report published by the SEC, the regulatory body talked about Initial Coin Offerings [ICOs], the rules and procedures behind it as well as the main issue of legitimacy, one of the most recurring topics in the field of cryptocurrencies. The report starts by stating:

“Companies and individuals are increasingly considering initial coin offerings (ICOs) as a way to raise capital or participate in investment opportunities. While these digital assets and the technology behind them may present a new and efficient means for carrying out financial transactions, they also bring an increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.”

In the report, the SEC has also given a detailed list of the five things that a user needs to know about ICOs. They have stated that ICOs can be security offerings and can fall under the SEC’s jurisdiction of enforcing federal securities laws. The SEC also added:

“ICOs that are securities most likely need to be registered with the SEC or fall under an exemption to registration.”

The clause is important because of the SEC’s tussle with the Bitcoin ETF, which were pitched by the Winklevoss brothers as well as the VanEck Bitcoin ETF. The VanEck Bitcoin ETF was also in the news recently when they stated that they withdrew the ETF application because they “didn’t want to slip through the cracks”.

The firm has claimed that this decision was triggered because of the US government shutdown. The SEC’s latest release also claims that tokens sold in ICOs can be called many things. To elucidate:

“ICOs, or more specifically tokens, can be called a variety of names, but merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.”

The governing body has further commented on the security risks that come along with the ICOs. There has been a clear mention of the fraudulent nature of some investments while there are others which are honest investment opportunities. According to the SEC:

“They may also present substantial risks for loss or manipulation, including through hacking, with little recourse for victims after-the-fact.”





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Engineering graduate,crypto head and Arsenal fan. Is fascinated by technology and all its marvels. Strictly against pineapple on pizza.

Bitcoin

Is the scarcity principle a factor in Bitcoin’s valuation or is it just crypto white noise?

Biraajmaan Tamuly

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Is Bitcoin being scarce changes the way we put forward its valuation or is it just Crypto white noise?
Source: Pixabay

The aspect of scarcity is fundamental to the Bitcoin community, with its limited availability often seen as a virtue in a world where governments have unlimited power to print fiat currencies. With the value of Bitcoin increasing day by day, the virtual asset is getting close to its saturation point.

At press time, 17,763,712 BTC were in supply, very close to the 21 million Bitcoin supply cap. However, the last BTC will be minted on 7th May 2140. That is almost 100 years from now. So, there is still a significant period of time before Bitcoin’s production halts for good.

Many in the community have suggested that Bitcoin’s scarcity has genuine value because it makes the virtual asset “deflationary.” In light of Facebook’s announcement of “Libra” coin, it has been argued that it will not generate any circumstantial threat to Bitcoin, solely on the fact that Bitcoin was scarce and Libra was not.

A recent Medium article released by Forbes summed up the scenario. It stated,

“It will take time, but Facebook will greatly accelerate the pace of teaching people about cryptocurrencies. And when this happens, more people will turn to bitcoin for one simple reason — bitcoin is scarce, while Facebook’s cryptocurrency is not.”

Another aspect that explains the importance of Bitcoin’s scarcity value is its comparison with Gold, which is also a scarce commodity. A key model that explains Gold’s intrinsic value in the market is the Stock to Flow ratio.

The S2F ratio of a commodity explains the scarcity value as it is the amount of an asset that is available to the amount that is produced annually. Moreover, the higher the S2F value of an asset, the lesser the inflation rate attached to it. At press time, Gold had the highest S2F value, but Bitcoin was close behind and it was stated that by August 2020, Bitcoins S2F’s value would be 55.2 to Gold’s 62.

However, a significant counter-argument against Bitcoin’s scarcity in the community was put forth, with none other than legendary investor, Warren Buffet, claiming that Bitcoin had no “intrinsic value.”

Recently, Peter Schiff, CEO at Euro Pacific Capital, explained that Bitcoin was not scarce due to the availability of other crypto-assets which made Bitcoin’s scarce value quite redundant since crypto assets, with better properties and characteristics, could be created anytime.

The argument was widely opposed by a majority of the community, with certain crypto-enthusiasts deciding to respond to the post. Twitter user, @Sisko8, said,

“The Mona Lisa is not really scarce, as there is an infinite supply of other paintings with identical or superior painting techniques that can be created out of 3$ paint and canvas, including photocopies of the Mona Lisa.”





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