I just heard about SEC suing PAXOS for issuing BUSD. This is crazy considering its issued by a US company that has license and everything. So how will it be if they decide to go after other stable coins even of DJED is different type of stable coin (not really algorithmic either but tries to emulate a stable coin).
This is a question where the answer is yet to be seen and I don’t think anyone has an answer. BUSD coins I believed is backed, correct me if I’m wrong, by cash and US government debt and securities so if PAXOS is holding them, then they are indirectly holding US securities so yes I can see why the SEC is doing this. With Djed, you’re holding a synthetic asset that I feel is neither a commodity nor a security.
Regulation is slowly finding some footing in the crypto industry. This is probably good particularly after the disastrous year last year with Terra Luna and FTX and not to mention the numerous hacks that happened. The way I see it, crypto should have a regulatory framework of its own, something like a Cryptocurrency Exchange Commission, where regulators properly study it, study the impact of decentralization, and properly define things like stablecoins, staking, miniing, etc. and build the framework around it. Particularly in my point of view the concept of decentralization is particularly important which regulators have not really addressed yet.
EDIT: SEC crackdown could 'benefit' decentralized staking if it isn't banned – Lido exec
I agree with most but not the SEC going after stable coin. Its for sure not a security if its 1:1. There is no gain or company or anything that can be applied to a stable coin.
However with DJED i can see argument its a security since the value can be based on the asset backing it like Cardano etc.
I love the idea for “Cryptocurrency Exchange Commission” but i doubt they would allow it.
Also we people give US to much of a credit! SEC cant go after people/projects that are not in the US 
I think the SEC has a much wider view of how they see “profit” or “gain” than what you are implying. Consider that stable coins are the other side of most trades and profit or gain can be relative to the alternative or other side. I think it is possible to make the argument that stable coins like BUSD are securities.
Djed on the other hand is more peculiar. Essentially it is a derivative of Ada where its price in Ada is governed by mathematics and oracle feeds (algorithmic) without human direction or control. Shen is similarly a derivative of Ada governed by mathematics. The “Howey” test may be more difficult to apply to Djed unless you also argue and prove that Ada is a security.
As there’s really no answer yet to this question it’s healthy to discuss and speculate. As in my former post there’s a need for regulators to have proper definition of things. If what you’re saying is correct that DJed is a security because it’s backed by ADA, then ADA itself would be considered a security.
If I own Apple shares then I’m part of it owner of Apple and so it’s a security but if I own ADA, am I part of owner of the Cardano network? But I’m staking simply to secure the network.
You’ll never know perhaps the industry will get its on will commission. But much of this regulatory fuss is currently converging in the US. I hope it gets regulation right that doesn’t dampen it’s competitiveness in the industry. Otherwise the big bulk of the industry could happen in Dubai instead.
That is not what I am saying.
To be clear, I don’t think Ada is a security in the long term. However, in the short term the argument is more problematic because we are currently dependent on IOG to build things and are thus not yet properly unhinged from “expectation of profits being derived from the efforts of others” (IOG). Once we have CIP 1694 implemented with on-chain governance and a constitution then we govern ourselves and pay for development using our own treasury funding. At that point, we are therefore arguably dependent only on ourselves. I think that is an important distinction when applying the Howey test.
In the short to medium term there are much easier targets than Cardano for the SEC to test the law over.
I also don’t think Djed or Shen are securities. I think they are mathematical derivatives of Ada calculated based upon an oracle price feed using decentralised algorithms.
The SEC likely has an easier case to argue that USDC, Tether, BUSD etc. are securities. Regulators like SEC usually go after the easier, more certain, targets first in order to build case law precedents.
That’s because of decentralisation and the word is not on the vocabulary yet of the regulators.
This is categorically not true. If that would be true then all money is basically a security!
People use currency to buy stuff, it doesn’t matter what you buy, if its payed with credit card, cash, bank transfer or stable coin! Its all currency moving back and forth. So how can you claim one is security and not the other? i just don’t get it!
To be honest i think the “Howey” test is garbage and not applicable for cryto in many ways. And i have very little respect for the SEC and these government that only try to suppress people and are in the pocket of big corps and banks.
But if i understand the “Howey” test then yes i can see that ADA could be a security. After all IOG is pretty much in charge of the repository and Charles is the CEO. Maybe i’m wrong but that is my understanding. So let’s say Charles tomorrow decides to step down (like EOS CEO). And he pulls his developers out. I’m sure ADA will drop 90%. So in that way the value is directly connected to the effort of a “company”.
I love ADA and all but i see this as a big risk.
I think i cover the security aspect above. And i agree allot of the regulation is taking place in the US (sadly) and others follow. But i’m hoping other countries like Dubai and UK wake up and regulate it more fair. Maybe US will have no choice to ease up. Right now it feels like they are pushing very hard to kill the market but its to little to late. I doubt they can sustain the market forever.
I will never sell 
Exactly my point
Interesting article on the subject:
https://cointelegraph.com/news/are-stablecoins-securities-well-its-not-so-simple-say-lawyers
The “Howey test” is only for a subcategory of securities – investment contracts. A thing can fail the Howey test, not be an investment contract, but still be a security.
And the argument that holders are exposed to the risk of the treasury backing the stablecoin even if it does not promise profits, is also good. In fact, the question if and where the fiat-backing of these things really is was also posed inside crypto.
Seems totally legitimate and not a “suppression” to establish a regulation over that to protect the holders. And issuers could just register their stablecoins as securities. Why should other, supposedly more lax regulation be “more fair”?
I don’t like where this is headed, but I have to agree with this quote:
“Worth fighting tooth and nail, but everyone who is shrugging this off as “lol the SEC got it wrong, this doesn’t pass the Howey test” needs to re-eval. The SEC, believe it or not, has knowledgeable securities counsel,”
Don’t get the article fully to be honest. I goes back and forth but to me if they say stable coin is security then all currency is also security.
Buy/sell/arbitrage and all of that can be done with fiat too so why target stable coin only?
As far as I understood the “these assets hold underlying treasuries” part:
For a fiat-backed stablecoin, there is a risk to the holder that the fiat-backing is not really there or they gamble it away in high-risk investments. So, there is a reason to regulate it, to require that they register it as a security, so that the SEC can check in on these registered securities.
For cash, you don’t have that problem. You have the cash directly.
For bank accounts, they are heavily regulated. They have to give you guarantees and have insurances that secure your accounts there against bankruptcy of the bank etc. So, it is just not true that “they” are only going after crypto. Comparable things in TradFi are already heavily regulated. They just try to do the same in crypto.
And those are far more moves against the issuers of those products – stablecoins in this case – than against the users. The issuers could choose to just register with the SEC, accept their regulation, and continue to offer to the users. They choose to frame it as them being in the same boat as their users and the evil SEC going against both. You could equally well frame that as the issuers avoiding regulation to continue to have maximal freedom to rip their users off. And if there is something like truth, it is probably somewhere in the middle between these extremes.
Of course, you can have the opinion that the motivations of government agencies are never sincere, or the ideology to at least assume that it could be insincere and your are better off on your own and fight every bit of government power irrespective how it is justified and balanced. But that then are opinions and ideologies and they are initially just as valid and legitimate as the opinion that the SEC is honest with its intentions and does a best effort to protect stablecoin users.
The stable coins the SEC is going after have companies and individuals which are ultimately making decisions about how they operate. IE: What asset backing they have, who can use them, how they get redeemed, etc. I think it is easy to see that such decisions, and the entities making those decisions, pose risks to users and financial markets. Therefore I also think it is easy for the SEC to argue that such entities need to be regulated.
I also point out that the simple argument:
“Oh stables coins are not a security because there is no expectation of profit since they are stable so the Howey test doesn’t apply”.
Will not fly.
To follow up, I think Djed has two important differences:
Instead Djed is a derivative of Ada and has simple algorithms to calculate the relative amount of Ada it can be exchanged for. There is no human decisions in any of that. (Though smart contracts should be open-sourced to make everything transparent.)
However, perhaps Coti’s service fee for monitoring and upgrading software could be a problem. Maybe the SEC can seek to regulate that???
The SEC might not agree with the above or might find some other way to attack it. Nevertheless, such an attack would be much, much, more difficult than going after the centralised, US treasury / fiat backed stable coins. I also think Dai and other stable coins are easier targets than Djed and the SEC is not going to go after the hardest target first.
I thought PAXOS was already audited so they have proof that they have the 1:1. I agree regulation in term that there must be audit and backing is great but makin it a security i thought have other implications. I’m not from US so my understanding is also a bit limited i must admit. I hope this is correct:
Again this goes back to the ADA that backs DJED. Value of that is directly related to the work IOG does. I think we talked about it above
The risk is that value of ADA can go to 0 or much lower and a bank run could destroy the peg!
Ex IOG for some reason dont work with ADA anymore, Charles all of the sudden decide to do something else, like a black swan even …
Even the risk is very low it could happen. Just look at Luna and how confident everyone was that it was the best stable coin and all. Hell i thought so.