How ShapeShift’s SEC Ruling Sheds Light on Crypto’s Complex Use Cases

One of the longest-running issues within the crypto industry is a universal agreement on what its use cases are. This is especially tricky for companies that operate in the space as many have found themselves in hot water with the law over this issue. 

Take ShapeShift, a now-defunct Colorado-based crypto exchange that has agreed to a cease and desist from the Securities and Exchange Commission, along with a fine of $275,000 fine. This ruling stems from its previous activities, which included selling digital assets and Investment contracts. The issue with this was that ShapeShift was not properly registered to offer these services. Additionally, the SEC believed that the investment contracts being sold constituted unregistered securities. 

The ‘Unregulated Securities’ Debate 

ShapeShift is far from the first company in the crypto space to get caught up in a scandal regarding unregistered securities. Telegram was taken to court by the SEC over accusations of its TON token being an unregistered security. The same was true of Ripple Labs over its native XRP token. Even the recent debacle with CoinBase, Gemini, Binance, and several other big names in the space boils down to the belief that some cryptos (or all) are securities. 

Cryptos, at their core, serve multiple functions. They are mediums of exchange, investment vehicles, stores of value, and so on. But the way many regulatory bodies like the SEC see it, they operate in a similar way to stocks and thus, need to fall under the same regulation. 

At the same time, this isn’t a hard and fast rule. Ripple Labs famously won its lawsuit with the SEC and this had a positive impact on the XRP market price. While this was a victory for Ripple Labs, the debate about whether or not cryptos are securities has not stopped and neither have the legal proceedings that spring from it. 

The Uses of Crypto 

While the industry still grapples with whether or not cryptos are securities, there are certain uses of these digital assets that have been fully established. 

• Gambling 

Years ago, many might not have predicted that crypto would be as prominent in the gambling sector as it is. But amazingly, the gambling space has become rather fond of cryptocurrency. There are sites that accept tokens alongside fiat current and even some that only accept cryptocurrency. 

For users, crypto offers more privacy, greater control over their funds, and the possibility of increasing in value, says crypto expert, Nick Pappas. Because of this, sites like Roobet have increased in popularity and more seem to emerge every day. Given the current bull run that Bitcoin and other tokens are experiencing, we can expect the use of crypto for gambling to continue over time. 

• Retail Purchases 

This is where the ‘currency’ part of ‘cryptocurrency’ comes in. As cryptocurrency has grown in popularity and Visibility, a number of businesses have started accepting it for goods and services. 

Multinationals like Microsoft and Burger King have created structures for accepting cryptocurrencies, as has a horde of local businesses around the world. There are also several websites that allow customers to buy gift cards for popular brands using their cryptocurrency. 

This has helped to integrate crypto further into the mainstream and create more avenues for users to spend their tokens with ease. These sorts of initiatives also play the crucial role of centring cryptocurrencies in use cases outside of profit-making. 

• Paying Rent and Bills

Over the years, a number of property owners and entrepreneurs have begun accepting cryptocurrency either for rent or even for mortgage payments. 

On top of this, there are platforms that allow people to pay their recurring bills using cryptocurrency. This includes everything from electric bills to Netflix and streamlines the process of converting crypto to fiat if needed and making sure that the payments go through. 

Just like with domestic payments, these allow crypto to be spent as easily as fiat currency and create more convenience for users. 

• Investment 

Perhaps the most well-known application of crypto is as an Investment vehicle. Most of us are aware that we can buy and sell cryptocurrency hoping to make a profit from its market movements. However, this only scratches the surface of its possible uses as an Investment. 

Certain cryptos can be staked to earn interest and this can become a source of passive income. Cryptos have also seen a major win in the last few years with the increase in exchange-traded funds. In the United States, history was made earlier this year when a spot Bitcoin ETF was approved. With all these options in the market. It comes as no surprise that crypto has become such a sought-after investment vehicle. 

• Hedge Against Inflation

From Turkey to Nigeria, many countries around the world are seeing record levels of inflation. These sorts of situations highlight cryptos’ potential as a hedge against economic downturns. There is existing data which shows that crypto is a better hedge against inflation than even legacy assets like gold. 

This offers relief for consumers who might be dealing with inflation of their local fiat currency. There is already a sizable number of people who are holding on to their tokens long-term and with this added benefit of combating inflation, crypto use in countries with inflation challenges should be on the rise. 

• Funds Transfer 

People need to send money to others for various reasons but current cross-border transfer options can prove challenging. These transfers can often take hours or even days to complete and the associated fees can prove a hassle. 

Thankfully, there are several cryptos that have proven to be especially useful for cross-border transactions. XRP, for example, has been known to complete transfers in mere seconds while only charging pennies in transaction fees. In fact, XRP has been so efficient at this that it has established partnerships with companies like Western Union. 

The decentralized nature of cryptocurrency and the fee structures that many of them operate with means that funds can be sent across borders with an affordability and speed that is unprecedented. 

• Lotteries 

 Lotteries have existed for decades but have gotten a bit of an upgrade thanks to cryptocurrency. There are several initiatives online that allow people to deposit their tokens and maybe win some in return. Even more novel are no-loss lotteries which see people deposit their tokens, which are staked to earn interest. 

The interest is given to a winner and those who don’t win are given their initial wager back. This system removes the downsides of lotteries and with the use of smart contracts, ensures efficiency. 

Conclusion 

At this point, it will take years before the financial sector reaches a consensus on whether or not cryptocurrency is inherently a security. The ShapeShift ruling might have ended the issues with one company but it will be far from the last. 

Cryptocurrency has proven to be as complex as it is innovative and this complexity extends to its use cases as well. Crypto users have enjoyed these assets as mediums of Exchange, Investment vehicles, and everything in between. As they continue to do so, companies in the space will have to contend with the legal definition of crypto and how this ultimately affects their customers.