Why Charlie Lee Divesting His Litecoin is Great Move, Regulations-Wise

I’m not one to regularly contribute to this subreddit. I’ve got litecoin, but generally as a hedge against the shenanigans of bitcoin. It is, after all, a code fork of bitcoin with a few architectural changes like an increased block generation time, and an alternate PoW. It has also directly contributed to the development of bitcion through things such as the UASF proposal.

When I listened to the testimony of the SEC chairman and CFTC chairman at their senate testimony the other day, there were so many things that need to be understood in the crypto space. It is really important to listen to Jay Clayton, and his understanding of the overlap between ICO’s and securities.

Here is him explaining just exactly what he’s responsible for regulating:

Now that Charlie Lee, the creator of the LTC, has sold his stake, and is still involved in the advancement of the protocol, it means that the definition of a security, as I see it, no longer applies. Lee now has no direct stake in the ‘stock’ of the instrument.

This type of language by the SEC chairman should send chills down the spine of any ICO controller :


“I’m very unhappy that people are conducting ICO’s like public offerings of stock when they know that they should be following the private placement rules. Those … things make me unhappy. To figure out how to deal with them is why we’re here.”

And this :


ICO’s that are securities offerings? We should regulate them like we regulate securities offerings. End of story.


The people who wrote ‘The 34’ and ‘The 33’ act, they were smart. They did it on a principle basis. They basically said, if you’re giving people money in exchange for the future development of a business, with the hope of a return … it’s a security.

When they were written, there was a great recognition that there was a tremendous amount of securities activity in this country, and that we were going to rely upon gate-keepers, to help us enforce those, and liability, rules. Accountants, lawyers, under-writers, sellers and the like. I’m counting on those people to do their job.

What does that mean? If you lose money on an ICO, you can sue them, and the SEC will support you in saying that the people who have stolen your money were doing so illegally.

If you have your money in an ICO knowing that this is the way they’re viewed by the regulators, you’re mad.

Litecoin doesn’t have this problem anymore. Bitcoin doesn’t either. Almost every other ICO that I know of does. Source