Tulips, Oranges, Worms, and Coins – Virtual, Digital, or Crypto Currency and the Securities Laws

31 Pages Posted: 14 Mar 2019 Last revised: 25 Feb 2020

See all articles by Thomas Lee Hazen

Thomas Lee Hazen

University of North Carolina School of Law

Date Written: February 23, 2019

Abstract

This Article examines the applicability of the federal securities laws to digital currencies. Although some enforcement actions have been brought by the SEC, digital currency transactions remain largely unregulated. The securities laws contain a broad definition of what constitutes a security. Finding a security to exist triggers many regulatory provisions of the securities laws. There is considerable case law interpreting the now well-developed test for what constitutes an “investment contract” leading to the finding that a security exists. However, to date, there is sparse authority applying the securities laws to virtual, digital, or crypto currencies. This article examines the investment contract analysis and concludes that initial coin offerings and many, if not most digital currency transactions involve securities and therefore are subject to SEC jurisdiction and to the jurisdiction of state securities administrators. The article then outlines the regulatory consequences of applying the securities laws to digital currency transactions.

Keywords: Cryptocurrency, Virtual Currency, Digital Currency, Securities, Finance, Technology

JEL Classification: K22

Suggested Citation

Hazen, Thomas Lee, Tulips, Oranges, Worms, and Coins – Virtual, Digital, or Crypto Currency and the Securities Laws (February 23, 2019). North Carolina Journal of Law and Technology, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3340661

Thomas Lee Hazen (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919--962-8504 (Phone)

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