Cube Chain, undergoing the US Securities and Exchange Commission’s Howey Test

Cube System (CEO Kim Dong Oh), a South Korean company developing the next generation of blockchain technology, announced their encrypted currency technology is a submission on the US Securities and Exchange Commission’s Howey Test.

The Howey Test is a standard test created by the US Supreme Court, when hearing a case between the SEC and the W.J. Howey Co., in 1946. The test was created to establish the basic standards for determining whether certain transactions qualified as investment contracts. If a specific cryptocurrency (Encrypted Currency) is determined to be eligible as an “investment contract”, the transaction would be a securities transaction, which in turn would mean, it will be in full compliance to the laws concerning securities investment.  The SEC has applied the Howey Test on cryptocurrencies, and in the event, they are determined to qualify as securities, they have plans to regulate the issuance, and sale of digital assets whilst being in compliance to the respective legislation (Securities Law).

Let’s consider the Ethereum based DAO token, issued last July. Those who owned the tokens were rewarded for their investments with the project’s profit share. Moreover, by reselling the DAO tokens, they would liquidate their investments. Recently the SEC, based on the results from the Howey test has determined the DAO token to qualify as security.

If a virtual currency is determined through the Howey test to be a non-securities by the SEC, it won’t be under the supervision and management of SEC, which in turn would mean that if a specific virtual currency is determined as a securities, those who own the currency would be rewarded with the project’s profit share, withal receiving their respective allotment.

Today, the standards in determining virtual currencies as securities vary in each country but since theirs aren’t like the ones established by the SEC’s Howey Test, the latter maintains its reliability.

In October 2017, one of the blockchain projects, the Chinese Bytom became the very first one to be determined as a non-security, and with that, roughly 100 cryptocurrencies are awaiting the SEC evaluation.

Cube Chain has submitted its organizational structure design and operation plan through a local law firm in the U.S. So far, making it is the very first Korean blockchain technology to apply for the Howey Test. 

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