In a recent Twitter exchange, Ripple CTO David Schwartz engaged in a discussion with Bitcoin proponent Tuur Demeester on the difference between Ethereum (ETH) and Microsoft (MSFT) stock.
The conversation started when Demeester tweeted about the Howey Test, which is a legal test used to determine if an investment is considered a security or not.
Demeester stated that according to the Howey Test, ETH is an investment of money in a common enterprise, with the expectation of profit to be derived from the efforts of others.
Schwartz responded by saying, “I don’t understand what you’re saying exactly. You’re saying there’s an investment of money in a common enterprise and that common enterprise is ETH. So you’re saying they bought their ETH from ETH?!”
Demeester explained that the running of ETH nodes and the writing of client upgrades is a closely coordinated, for-profit, centralized affair, making it easy to argue that investing in ETH is an investment in a common enterprise.
To this, Schwartz responded, “So you’re saying that when someone buys ETH on an exchange or gets it as a staking reward, that is “an investment of money” “in a common enterprise”? I don’t see how any money goes into any common thing at all.”
Demeester compared buying ETH to buying Microsoft shares, to which Schwartz pointed out that when someone buys Microsoft shares, they have legal rights over the company, which is not the case with ETH.
Schwartz then stated that it’s not clear what Demeester is alleging is analogous here. “To be clear, what I’m trying to understand is what you are saying is the “common enterprise” such that you can say that people who bought ETH on the secondary market or got it as a reward are investing money in that common enterprise,” he added.
The conversation between the two highlights the ongoing debate in the crypto community about whether or not cryptocurrencies like ETH should be considered securities. As regulations around digital assets continue to evolve, it will be interesting to see how the debate unfolds and what the final determination will be.
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