9th June 2023 > > Howey & Binance.

tl;dr

The Howey Test and personal frustration with senior management at Binance.

Market Snap

Market Wrap

This tight trading range shows no sign of breaking out one way or another. Is BTC destined to be the least volatile store of wealth? Will it replace fiat in the models used by investment “professionals” to dampen down portfolio growth expectations?

Occasional Series – Oxfam

Not known for displaying a lack of enthusiasm for the latest woke cause, an internal training document at Oxfam blames “mainstream feminism for supporting, not undoing, the root causes of sexual violence”.

What? I mean, what?

If you tick the “no” box when answering the question “Are you a misogynist?”, your job application to work at Oxfam goes straight in the bin.

As should everyone else’s direct debits that support an organisation with these values.

Occasional Series – Brexit

The CCC remains fiercely apolitical, but it is crystal clear that Brexit was bad.

The EU is now in recession.

If the UK had not voted for Brexit, the statistical addition of our economic performance to that of the rest of Europe would have meant no recession in the EU.

Shame on us.

Curious Cryptos’ Commentary – Howey Test

The Howey test dates from 1946 and is the legal tool used to determine if a financial product is a security or not.

Some may reasonably point out that society looked somewhat different in 1943 to today. Pearl Harbour was less than two years distant in the past at the time. Nagasaki and Hiroshima, undoubtedly two of the most seismic events in our shared history, were less than two years away.

But we are where we are, and until the US lawmakers come up with a legislative definition of a security – an unlikely solution in my opinion – we are stuck with Howey. Crypto enthusiasts must work with this less-than-ideal scenario.

I stumbled across this graphic, attributed to BeInCrypto, which might help us understand Howey:

Even those of us middle-aged blokes who need reading glasses cannot fail to notice in the bottom right-hand corner the section entitled “Profit expectation”.

Buying or selling fiat currency is free from any securities regulations worldwide for it is what you do with it that may lead to greater or lesser wealth.

And that must also apply to stablecoins (the concept of “staking rewards” is very new and is not part of the Howey Test as originally conceived. In any case, it is an equivalent to receiving interest on a fiat deposit account).

Which makes the SEC’s (Securities and Exchange Commission) claim that BUSD is a security to be utter and total nonsense.

Curious Cryptos’ Commentary – Binance.US

Following the SEC’s actions against Binance.US the firm has announced that it is suspending fiat deposits and withdrawals to become a crypto only exchange.

As you will recall the CCC reported on 30th May that Binance was no longer accepting GBP deposits from UK bank accounts.

Which got me thinking about the issues around the fiat on/off ramp. Our regular readers will recall that when the Nigerian government “banned” crypto trading, the local spot price of BTC jumped to a premium of 100% or so. The reason was that individuals would meet up in person to exchange fiat for BTC, paying with cash handed over in a battered old suitcase (a trope that Senator Elizabeth Warren would be pleased with) or, more realistically, as a bank transfer. Same demand, less supply, price goes up in a closed economy, though the mandarins that run Central Banks fail to understand this economics lesson 1.0.

There remain many ways of buying cryptos with fiat using regulated entities, but I was reminded of my early days of crypto investing, so I fired up my original conduit for buying cryptos - https://bittylicious.com/.

This is a delightfully old school looking website and is exactly the type of crypto website I would avoid now. It asks you to make a bank transfer on the promise of sending BTC to you on receipt of funds.

I mean, who would ever do that?

Well, me.

My transaction history shows that I first bought BTC on 14th May 2016 when BTC was trading at just over £300. In total I bought BTC on 16 different occasions through this website, and in every case, my BTC was deposited into my wallet, and my family and I remain proud owners of those BTC. Though fees are high at roughly 2.5% this is a regulated and compliant company.

So, if they can do it, why can’t Binance stick to the rules and the regulations?