The cryptocurrency world has been eagerly waiting for the SEC to clear up a burning legal issue over when digital tokens must be registered as a security. It turns out the SEC may not have an answer, according to Marco Santori, President and Chief Legal Office at the crypto firm Blockchain.
“Most people are expecting some big pronouncement from the SEC or the CFTC or some federal regulator. I don’t think that’s the way it’s going to go down,” said Santori, who dropped by Balancing the Ledger this week.
He instead suspects it will be a judge presiding over one of the numerous private lawsuits, including class action cases, who will define when a token is a security.
Santori is worth heeding as he’s one of the most prominent crypto lawyers in the country, and has had an integral role in shaping the U.S. investment climate for digital assets. His contributions include a white paper that offers a legal framework for selling tokens, and serving as counsel in early courtroom battles over Bitcoin.
Santori also shared his views on the current legal climate (beginning around the 8 minute mark of the video above), including an overview of a recent high profile speech by a senior SEC official about when a token is a security.
“Functionality is the dividing line but it’s not the whole dividing line. There’s more to it” said Santori. “It’s functionality plus a few other factors and we call all of that ‘decentralization’.”
Santori also provided an overview of Blockchain, which is a well-known provider of non-custodial wallets that, in the company’s phrasing let customers “be their own bank.”
He argues such wallets are superior to other services that hold cryptocurrencies like Bitcoin on their customers’ behalf, in part because they are more secure.
“Most of the hacking that goes on is a result of people relying on their telephone numbers as a credential, which is not the most secure way to go about it. And, two, in giving their valuable possessions—their coins—to a third party to hold on for them,” he said, adding this makes for a dangerous combination.
In the video above, Santori also shares his thoughts on the decision by crypto giant Binance to buy a wallet company this week, and described the growth of Blockchain’s new suite of products for institutional investors.