Recently, a member of the XRP community on The debate centers on the question of whether staking could be considered a literal investment contract in the context of the smart contract it uses. David Schwartz, Ripple’s chief technology officer, joined the conversation.
Recently, a member of the XRP community on The debate centers on the question of whether staking could be considered a literal investment contract in the context of the smart contract it uses. David Schwartz, Ripple’s chief technology officer, joined the conversation.
Tomiwabold OlajideSchwartz responded that a smart contract is simply a fact that defines certain properties of an asset: “A smart contract is simply a fact that is a property of the asset. Every asset has facts that are its properties.”
Gold, Metamask used as an analogy
Ripple’s CTO illustrated his point with a comparison to gold, stating“The fact that gold has 79 protons is not a contract that turns the sale of gold into an investment contract.” He thus points out that every asset has inherent properties, but these properties alone do not constitute a contract.
Schwartz further explains that if the mere act of “all the people who have the asset doing things” qualifies as a common enterprise, then virtually everything could be classified as a security. This broad definition would blur the lines between different asset classes and their legal status.
The discussion took an interesting turn when Ripple’s CTO cited Metamask as an example. According to Schwartz, Metamask’s efforts do not determine the profits of its users any more than De Beers’ efforts determine the profits of diamond holders. This analogy highlighted his belief that a company’s stake or shares related to an asset do not necessarily make the asset a security.
Implications for the cryptocurrency industry
This ongoing debate touches on a critical issue for the cryptocurrency industry, which is still grappling with definitions and regulatory frameworks. The distinction between what is and what is not a security has significant implications for the future of digital assets and their regulation.
Tomiwabold OlajideAs the community awaits the final ruling in the ongoing lawsuit involving Ripple, this current discussion sheds light on the intricate dance between technology, law, and regulation.
