If you were to look through our site, you’d see only a smattering of posts on the topic of an Initial Coin Offering (ICO). While an important part of many cryptocurrency projects worldwide, it’s not all that big of a deal for the PIVX community. Mainly because there wasn’t one.
As an active lurker and a sometimes banter-er on our Discord server, I’ve seen a few open discussions of the topic over the last year. Nothing major, but it is there. That noted, I did two nights of research to fully understand the implications of an ICO, crypto, and our beloved PIVX. Here’s what I learned.
Saying NO to the ICO
Again, you'll find only minor references to the point that there was no ICO nor a need for one. Instead, PIVX is a self-funded labor of experimentation. But what if the first developers did have an ICO? Then what?
The short answer is that we probably wouldn’t be having this conversation, obviously, but only because the coin would have ceased to exist as the US Securities and Exchange Commission would have put the kibosh on any further activities (perhaps). But, again, if the original team did do that, they would have surely failed what’s become known as the Howey Test, which we’ll cover in a moment.
In my understanding of the law, and after two days of reading, I’m basically a lawyer now; the single most important factor to our continued existence is that this was initially a knowledge project and not financial gain.
The Howey Test
At the risk of seeming like I’m plagiarizing, you can read a fabulous (and rather short) entry of the Howey Test on Wikipedia. But, first, the short point- as decided by the Supreme Court, if you answer yes to these (of course, there’s a debate to this), then you have yourself a Security (as defined by the SEC):
- An investment of money
- No. There was no external investment into PIVX.
- In a common enterprise
- No. By way of the community that exists around PIVX, it’s hard to deny that there is no common enterprise. However, the SEC in 1992 (that date is not wrong) has basically cleared PIVX from this “test.” In their own words: “Based on our experiences to date, investments in digital assets have constituted investments in a common enterprise because the fortunes of digital asset purchasers have been linked to each other or to the success of the promoter's efforts.” So, no investment, no common enterprise.
- Reasonable expectation of profit
- No. Again, this was a self-funded coding project. If it worked, great! If not, well, it did, so I don’t know the answer to that.
- To be derived from the efforts of others
- No. However, the SEC, again, was nice enough to give the community a most definite out. From their findings, they note/ask, “Does the purchaser reasonably expect to rely on the efforts of an [Active Participant]?” As we’ve already established that there was no ICO for anyone to buy from, there is no “purchaser” in this case.
I can understand if you don’t want to rely on a two-day lawyer. Good thing the PIVX team was thinking ahead. They obtain the services of a Washington DC law firm to figure out whether or not the project/coin could be considered a Security. You can read the findings here. (Spoiler Alert: it’s not a Security.)
SEC’s Digital Asset Analysis Framework, while not an action novel, is a great read to better understand their take on the matter.
So if there was no ICO, is a rich dead uncle funding this?
To be honest, that’s an odd question (that I totally made up). But no, PIVX is funded by itself. The initial development team built the coin to fund its own marketing, development, and technology sustainment. Also, as an extra reminder that something is going right, PIVX just had its fifth birthday recently, and as a DAO no less.
So long as PIVX remains a healthy project with laser-focused goals, it’ll be around for some time.
Questions, Comments, or Concerns? Contact me via [email protected].