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Creating 'assets' in a commodity environment
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Author Topic: Creating 'assets' in a commodity environment  (Read 823 times)

JanSako

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Creating 'assets' in a commodity environment
« on: December 21, 2014, 01:46:09 am »

Or what should we call them instead  ???

Imagine a group of farmers that grow corn. After the harvest each of them brings a bag of corn to a smart guy called James, and James takes a truckload of corn to a pig farmer. There he exchanges the corn for a promise of a share of pigs once the pigs are grown.
As the little pigs eat the corn, grow and are slaughtered, once a month James comes to the pig farm and picks up a bunch of sausages.
Then he gives each of his friends a number of sausages in proportion to the amount of corn they contributed. James keeps some of the sausages himself for his time, and the rest of the corn farmers are OK with this.

Would such a scheme be regulated as a 'security' for James? Given that he only deals with commodities, and no money exchanges hands?
Please do not think about the health and safety regulations concerning the transport of sausages for now :-).

If such a scheme is not considered a 'security', why would running an asset be regulated as such if the asset handles only commodities (altcoins)?

What terminology would we need to use to avoid words like asset, dividends, shares etc?

I believe using financial terminology, even if it sounds 'cool' and 'professional' could come back and bite us in the a$$.

What is NXT in this context and would the IRS or HM RS or other tax people buy it that i.e. a "mining asset" is really not an "unregistered security"?

Feel free to shoot my argument full of holes!
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jl777

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Re: Creating 'assets' in a commodity environment
« Reply #1 on: December 21, 2014, 01:56:42 am »

Or what should we call them instead  ???

Imagine a group of farmers that grow corn. After the harvest each of them brings a bag of corn to a smart guy called James, and James takes a truckload of corn to a pig farmer. There he exchanges the corn for a promise of a share of pigs once the pigs are grown.
As the little pigs eat the corn, grow and are slaughtered, once a month James comes to the pig farm and picks up a bunch of sausages.
Then he gives each of his friends a number of sausages in proportion to the amount of corn they contributed. James keeps some of the sausages himself for his time, and the rest of the corn farmers are OK with this.

Would such a scheme be regulated as a 'security' for James? Given that he only deals with commodities, and no money exchanges hands?
Please do not think about the health and safety regulations concerning the transport of sausages for now :-).

If such a scheme is not considered a 'security', why would running an asset be regulated as such if the asset handles only commodities (altcoins)?

What terminology would we need to use to avoid words like asset, dividends, shares etc?

I believe using financial terminology, even if it sounds 'cool' and 'professional' could come back and bite us in the a$$.

What is NXT in this context and would the IRS or HM RS or other tax people buy it that i.e. a "mining asset" is really not an "unregistered security"?

Feel free to shoot my argument full of holes!
I have heard that just changing what you call something, but not its nature doesnt change its legality. this makes sense. You can call some illegal substance "bananas" all you want, but if it is an illegal substance, these "bananas" would still be illegal.

Now, I also hear that if you call something using forbidden words, then that makes the difference on whether it is legal or not.

Well these two positions seem to be contradictory. Unless of course it just means that USSA will do whatever it wants just because it has the power to.

I think if we are playing an online MMORPG where we are calling things this or that, it really wouldnt be legally binding, so to speak. And that is all we are doing here, playing a MMORPG with NXT and its assets, etc.

I like your analogy, but USSA regulates all commodities too.

Any taxation really has to happen at the fiat level. So the conversion into and out of fiat are the taxation points. Anything else is quite meaningless. Of course to protect all of us from any harm, the USSA will just pass regulations that says we need to register all our passwords with their totally secure crypto password registration system. That way they can simply just take all our play money away at anytime to protect us

James
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JanSako

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Re: Creating 'assets' in a commodity environment
« Reply #2 on: December 21, 2014, 11:25:33 am »

I feel you James!

I was basing my reasoning on the(ir) determination that Bitcoin, and by extensions all cryptocrurrencies, are in fact commodities. Therefore the regs governing the purchase and sale of commodities should apply right?  ???

We could see some new developments, considering the hype Paycoin is launching with. I know GAW is US based, and the CEO was talking about them being in constant communication with the regulators there. Well, if Paycoin fails spectacularly, it might go the other way too  ;).

Of course the taxation will come at some point, and I am not even really opposed to it, if as you say, it comes at the point of fiat conversion.

I think we might want to think whether it is time to move away from the "play money" mentality, because looking at the transaction &pay volumes, at least some of the mining assets, it is really not play money any more.

Working on launching my first asset, and since I am here under my own name, would prefer not to pay out my profits as penalties to the Queen's taxman  8).

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