The hedge fund Numerai is going to issue its own cryptotoken, and this article nails the policy issues.

It doesn’t hurt that they quoted me, but–in all seriousness–the two primary risks inherent in app-coin issuance are well flagged: securities regulation and buggy smart-contract code. And, on the securities question, the article focuses, appropriately, on the Howey test and whether there is an issuer-investor relationship here: 

First: securities law. The Numeraire is one of a slew of new cyptocurrencies that have been released in the last year or so that have piqued the interest of Andreessen Horowitz, USV and other venture capital firms and entrepreneurs — and they’re generating real money for their developers. In 2016, according to cryptocurrency research firm Smith + Crown, 64 tokens were released in what are commonly called “initial coin offerings,” raising $103 million, enabling these efforts to bypass venture funding.

However, Peter Van Valkenburgh, research director at Coin Center, an advocacy group focused on the public policy issues facing cryptocurrencies, says that, unlike some other new tokens, the Numeraire would likely not be considered a security. “If they’re giving them out to people who submit trading strategies or perform some sort of useful work, it’s not a speculative investment relationship between the putative issuer and putative investor,” says Van Valkenburgh. “It’s really more like someone being paid for contributing something, more like a wage in a giant decentralized corporation. … It wouldn’t be that different from rewarding people with points.”

Numerai’s work here is a great example of how app-coins and open blockchain networks may be able to streamline the provision of public goods and enhance transparency in financial markets. Read the whole article.