I am interested to understand this term in general way as well as in the context of latest development in the crypto community with SEC starting a lawsuit against Binance saying its platforms traded 10 tokens that are securities.
What are securities in general and how is that applied to crypto currencies?
In: 4
Securities are metaphorical pieces of paper you can buy and sell that give you the rights to something else, like a share in a company gives you the right to take some of the company’s profits, or a derivative gives you the right to trade shares at a certain price.
Currencies *aren’t* legally considered securities, but the controversy exists because a lot of crypto “currencies” are just shares in disguise. Buying and holding BNB is effectively giving money to Binance and then getting back something similar to a share of Binance’s profits – which is what a share is. Except BNB isn’t *called* shares so none of the laws about shares apply to it. If you had Binance shares you could vote in the shareholder meetings to decide how much of Binance’s profit you should get; if you have BNB you couldn’t, so it’s like Binance is cheating.
The big cryptocurrencies are safely in the realm of currencies, but there’s a reason everyone and their dog has their own *little* cryptocurrency, and it’s precisely because you give them money but they don’t have to let you vote how they spend it. If the SEC decides those little currencies are actually securities they could be in a lot of legal trouble and have to pay back all the people who bought the currency.
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