Saturday, February 16, 2019

SEC, in supervising cryptocurrency exchanges, warns that a programmer could need a "license to publish" code, a medieval European concept

Although we look to the federal government to reign in on abusive or collusion practices restraining fair competition (as with YouTuberLaw’s recent project to file a complaint against payment processors in the Patreon case with the FTC), it can go too far. 
Electronic Frontier Foundation, in a recent piece by Rainey Reitman, notes that the Securities and Exchange Commission has warned some publishers that disseminating code (maybe open source??) related to cryptocurrency might be viewed as running a securities exchange illegally, story

This has to do with the decentralized exchange EtherDelta

EFF argues that the SEC statement could imply an administrative law requirement of a “license to publish,” an idea that was prevalent in Europe after the printing press was invented (I actually covered that in my 1998 “Our Fundamental Rights” book so I probably have some reason to look into this further again, for my DADT Notes blog.) 
EFF included a link to a PDF of a letter it sent. 

The SEC’s language was:

A system uses established non-discretionary methods if it provides a trading facility or sets rules.  For example, an entity that provides an algorithm, run on a computer program or on a smart contract using blockchain technology, as a means to bring together or execute orders could be providing a trading facility. As another example, an entity that sets execution priorities, standardizes material terms for digital asset securities traded on the system, or requires orders to conform with predetermined protocols of a smart contract, could be setting rules. Additionally, if one entity arranges for other entities, either directly or indirectly, to provide the various functions of a trading system that together meet the definition of an exchange, the entity arranging the collective efforts could be considered to have established an exchange.”

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