Why DirtiCoin is a Currency and not a security? The question of whether DirtiCoin constitutes a security has been raised and considered carefully. The “Howey Test” is a key consideration for whether any purchase constitutes a security. Securities in the USA are closely regulated by the Securities and Exchange Commission (SEC).
Howey Test
Investopedia (Reiff, Howey Test, 2021) explains that the Howey Test refers to a US Supreme Court (SCOTUS) case. The case established criteria to determine whether a transaction qualifies as an investment contract (a security). Therefore, if it is a security then disclosure and registration requirements apply under the Securities Act of 1933 and the Securities Exchange Act of 1934. There are four key points in the criteria.
- An investment of money
- In a common enterprise
- With the expectation of profit
- Value derived from the efforts of others
Currency – Failing the Test is Good
First, investing is such an ambiguous term. For example, it could be defined by SCOTUS as making an investment of coin money into paper money. For instance, exchanging a roll of quarters for a $10 bill. If you put money into your piggy bank, you are investing. Everybody passes the first test.
Second, if anyone other than you is working to protect or grow your money, it’s a common enterprise. Again, everybody passes the second test.
Third, common sense says, if you expect the value of your money to increase, you have an expectation of profit. Interestingly, SCOTUS and the SEC explicitly exclude increases in value due solely to real estate appreciation. Real estate appreciation is the lynchpin of the protections DirtiCoin provides for your stored wealth. DirtiCoin fails this test. That is really good for you.
Fourth, you are deriving value from the effort others unless you do it all yourself. Everyone passes this test.
SEC Chair
In June of 2019 SEC Chair Jay Clayton ruled that bitcoin is not a security (Rakesh, 2019). “Cryptocurrencies are replacements for sovereign currencies…[they] replace the yen, the dollar, the euro with bitcoin. That type of currency is not a security.” He made these statements in an interview with CNBC (Rooney, 2018) earlier in June of 2019.
In the interview Clayton noted that “A token, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you my money I say, ‘you can get a return’ that is a security and we regulate that,” Clayton said. “We regulate the offering of that security and regulate the trading of that security.”
A Good Thing
Why is it a good thing that DirtiCoin fails the Howey Test? Because, failing the test means you have another form of cash where you can store your wealth. DirtiCoin is the best cash for storing your wealth.
Currency – No Returns or Dividends
With DirtiCoin, you don’t get returns or dividends. Storing your wealth in DirtiCoin gives you a currency backed by tangible assets. You can use cryptocurrency exchanges to exchange fiat currency and other cryptocurrencies for DirtiCoin just as you might use a Foreign Currency Exchange (FOREX) to exchange your US Dollars for Euros, Yen, Rubles, etc. You will want to exchange your inflationary fiat currencies and volatile cryptocurrencies for DirtiCoin to protect your wealth against the volatility or ongoing devaluation of those currencies. DirtiCoin appeals to you because you understand the value having currency whose value is backed by a defined reserve of real-world assets, i.e., real estate and real estate related instruments. The desirability of DirtiCoin as a currency is further strengthened by the visibility of those reserves in the Asset Ledger.
Gold, Silver, and Dirt. Oh, my!
Gold used to be the commodity backing the USD. The government kept a supply of gold in Fort Knox. In theory, this meant that someone could redeem their USD for a specific amount of gold. With the Bretton Woods agreement of 1971 the USD and nearly every other currency in the world relinquished the gold standard. Instead, they backed the value of the USD with nothing more than the faith and credit of the USA. This the essence of so-called fiat currency. Its value is what the government says it is.
Because DirtiCoin is backed by tangible real estate it can be redeemed for value just like gold standard currency, Ordinary redemption comes by exchanging DirtiDollars (DiD) for ETH, BTC, or USD. In the unlikely event that the Company were to totally liquidate, to redeem your DiD the Company will sell its real estate, add that to our liquid assets, and give you your money. The wealth you store in DirtiCoin is backed by assets that have real world value. That backing is more substantial than the “faith and credit” of any country.
Currency Appreciation Drives Value
There is no expectation of profit, dividends, or interest accruing to you through DirtiCoin. Returns generated from the real estate are incidental to the value proposition of DirtiCoin. They fund the operations of DirtiCoinMinting (the Company). They don’t directly affect the value of DirtiCoin and are not paid to DirtiCoin holders. The value of DirtiCoin grows directly from the appreciating value of the real estate bought by the Company.
Conclusions
DirtiCoin is NOT a security, it is a currency. At some point in the not-too-distant future, you will have a debit card to spend your DirtiCoin. We want DirtiCoin to become the next world-wide currency. We want to replace fiat currencies with DirtiCoin to help people all over the world store their wealth safely from inflation and volatility.
