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...or, rather, it's fairly unlikely that you're one of the 2571 holders currently cited by the Etherscan Token Tracker as having an interest in ME.
Meanwhile, as a matter of disambiguation as much as anything, I hope you didn't invest in ME Coin in Colombia, c. 2018, because, if you did, you may have lost rather a lot of money in a scheme to acquire deposits on the fraudulent promise of returns on investment payable in Bitcoin.
Which brings us neatly to the two bits of the "crypto" ecosphere that most people are aware of even if they've never heard of NEM (XEM) or Cryptokitties: Bitcoin (BTC) and Ether (ETH).
And people who are aware of Bitcoin and Ether but want to know more will often offer up their preliminary understanding which goes something like this:
Bitcoin is the original blockchain token developed by Satoshi Nakamoto.
Bitcoin is controversial right now because it's energy-intensive to mine/mint.
Bitcoin has high-profile celebrity endorsers like Elon Musk and Jack Dorsey.
Ether is trying to establish an alternative strategy called "proof of stake".
Ethereum (the platform on which Ether trades) offers a way into Decentralised Finance (DeFi, as opposed to Traditional Finance or TradFi)
Ether is a convenient way to pay for the new digital art form: Non-Fungible Tokens (NFTs)
All of which are part of the conventional received wisdom for the crypto-curious. In this camp you might find financial journalists, researchers and self-consciously-diversified investors.
At the other end of the spectrum are the crypto-anarchists who firmly believe tokens offer a means of reducing our dependency on the international financial system. Some think that anonymity means crypto wealth can't be taxed or regulated, others are convinced that crypto offers the perfect hedge against unjust inflationary policies being pursued by a corrupt governing class, some see decentralisation as an act of rebellion against the hegemony of financial intermediaries and yet others believe that self-executing ("smart") contracts in crypto will create a metaverse beyond the reach not only of central banks and the IRS but also beyond the reach of courts as instruments of state-control over private finance.
And, in the middle are at least three other well-established groups: first, committed and enthusiastic retail day traders hoping to make a killing from crypto's characteristic volatility; second, traditional finance intermediaries who want to cherry-pick all that crypto has to offer, without fully engaging its subversive or disruptive potential; and third, Crime Inc. attracted by the thought that the anonymity and geographic untethering that comes with permissionless, decentralised payment systems will help them evade the long reach of law enforcement.
And, given that the field of crypto has been staked out in this way, I thought I would hypothesise a pressing question for each group and try to answer it in this post. Here goes:
What does "Non-Fungible" mean?
Why do you say smart contracts are always subject to legal interpretation?
Is crypto going to be regulated?
How is crypto going to be regulated?
🎵Watcha lookin' at? You know you don't want none of dis.🎵*
"Non-fungible Token" is a Tech thing. It broadly means a token which conforms to a standard developed for the purpose of creating NFTs (with apologies for the circularity). By way of example, tokens developed on Ethereum that conform to the ERC-20 standard are fungible. Ethereum’s non-fungible token standard, (famously used to mint CryptoKitties until 2020), is ERC-721. The difference between fungible and non-fungible standards is the information embedded in the token. With a non-fungible standard, that information will permanently establish the uniqueness of the token. Smart contract information can also be embedded in the token to control the means by which people access either the token or a real life asset associated with it--a kind of self-executing licence, if you like.
"Fungible" is also an idea broadly understood and used by market participants--or, at least, market participants who've contemplated their own abstract context--and "fungibility" is a concept which appears in both legislation and caselaw, usually as a means of identifying certain securities and commodities. In both cases, the idea is that a fungible good--either physical or abstract--is perfectly interchangeable for commercial purposes with another of similar type (like a 1kg allocation of sugar). A non-fungible good is one that isn't--like a diamond. In both cases, fungibility is a commercial, social, market or legal construct rather than an innate truth. Very little in the world is absolutely physically uniform (certainly most "fungible goods" aren't) and, correlatively, we could simply decide, as a social construct, that every item within a certain category is broadly interchangeable (you wanted a 1.0ct diamond, you got a 1.0ct diamond *shrug*💍). That's the idea behind most early forms of money like shells and pebbles.
Although there's a degree of overlap between all three meanings, they are not co-extensive. For example, the fact that a thing is literally unique and identifiable as such--like a dollar bill, which has a serial number--does not prevent its becoming fungible for market and legal purposes. So, if I were Ruler of the Universe and I wanted to create a digital dollar for the Federal Reserve (CBDC), I could do so laboriously, using an NFT standard and associating each individual physical dollar currently in circulation with a non-fungible token, before destroying the notes. That would not necessarily mean that I had rendered the digital USD non-fungible in a legal or market sense--because the fungibility of the dollar is not a physical or virtual characteristic, it is a legal, social and economic construct--it would just mean that I had been inefficient about digitisation. A typical way of purchasing an NFT today is to use ETH but NFTs can be exchanged for one another on the Ethereum network, so it's perfectly possible to imagine a world in which unique virtual dollar bills minted to an NFT standard are exchangeable for one another, and for other goods, at a constant value of $1.
Funnily enough, there's a similar flaw at the heart of the idea that, if code is written perfectly, smart contracts are not subject to interpretation by outside entities or jurisdictions. In a smart contract, the deal may self-execute in such a way as to transfer tokens in A's wallet to B's wallet as soon as a book entry is made by JRP Custody to recognise that X has acquired a security from Y but a court will still feel absolutely free to ask whether the book-entry was mistaken, whether a reasonable person would have understood that offer to refer to that security, whether B is under sanction or Y is prohibited from selling securities, whether A's wallet was subject to a prior attachment order, whether A had good title to the tokens and, indeed, whether that even matters as far as tokens are concerned. And, having weighed the question, the court will consider a remedy which it will address, not to any part of the technology or infrastructure, but to a natural or legal person. Ultimately, there will be consequences that one or more persons subject to the jurisdiction of the law cares about and things will be reset, moved away, wound up, unwound, frozen and/or transferred as necessary. As with "fungible", any confusion that exists rests in the notion that, by approximating certain theoretical constructs known to the market and to the law, code can benefit implicitly from existing socio-legal structures while eliminating the traditional penumbra of uncertainty, just by bringing binary reductionism to bear. That is not the case. If you intend words and phrases like "sale", "purchase", "order", "investment", "own" or "a share in" to have meaning and substance in your digital activity or scheme then you have imported both the law and its open texture. If you do not intend for those words to have meaning, then don't be surprised if even other committed crypto-anarchists are wary of giving you their money. 🎵I don't trust any, any of my friends.🎵**
In short, legal constructs are free standing, they aren't a system of semantic classification which pegs syntactic structures to meanings independent of the law. I mean, yes, okay, sometimes legal interpretation looks a lot like an exercise in semantic classification: "Dogs must be carried" could theoretically raise the question "is that a dog, or a fox"?
But legal interpretation really isn't like that for the most part. A plausible answer here, for example, would be: "it doesn't matter, the animal is clearly within the legislative intent regardless". And that brings us neatly to crypto regulation, which, as everyone knows, is sitting largely idle in a giant depot in the sky waiting for someone here on earth to say definitively whether cryptoassets are money, securities or commodities. The messy truth is that tokens can have the features which typically characterise any of the above (and/or, all of the above) but even if we employed someone a bit like a state-sponsored zoologist to fact-check every deal laboriously by hand and classify it for regulatory purposes, we still would not be guaranteed to arrive--as with the vulpine pet--at a satisfactory answer. That is not to say that some individual tokens are not clearly functioning today as a security or as money--they absolutely are--but it is to say that a world in which large swathes of market activity are indeterminate until our token-zoologist has spoken, and investors' legal and regulatory recourse is unclear, is not ideal.
There are two obvious alternative ways forward. First, if underground travellers regularly started pitching up at the station with a wide variety of canids, demanding to be allowed to travel with their pets on the escalators, the Underground operator would presumably amend its sign to "Canids must be carried". That represents the inclusive idea of a dedicated CryptoRegulator into which all these various tokens are swept as a first port of call:
A law defines crypto (with a certain de minimis threshold for value and some other safe-harbours for artistic endeavour, research and development, community enterprises and what not) and allocates all cryptoassets to a single regulator. That agency then passes secondary regulation requiring crypto issuers and crypto-infrastructure providers to demonstrate that they hold all required licences, authorisations and permissions for distribution from relevant agencies and government departments.
The upshot of this approach is that a person who wishes to offer crypto to the public will need to satisfy the CryptoRegulator that s/he has considered whether the issue is a security and, if so, has registered it with the SEC, before consent is obtained from either regulator. The broad objection to this way of proceeding is that it adds an extra layer of regulation to tokenised versions of financial instruments, over and above that which burdens the TradFi versions. So, there's an alternative which says: if you DO intend to offer crypto to the public AND you're NOT already registered for that purpose with another regulator, you need to speak to the CryptoRegulator first.*** (In either case, it would seem useful to expand and particularise market abuse rules on "pump and dump" schemes in cryptocurrencies.)
The second way forward is to create an ad hominem regulatory regime for gateway crypto infrastructure, including exchanges, wallet providers, custodians and marketplaces, which requires them to act as de facto regulators themselves, checking that licences, authorisations, registrations and/or permissions for distribution have been obtained prior to placement with a venue and/or applying AML and withholding tax at the point of holding.
Neither approach is likely to prove uncontroversial.
That, however, is not my problem.
Today, I've got a different headache entir...Hey, watcha lookin' at?
Haven't you ever seen a 5-foot woman wrestle a 120lb wolf down an escalator before?
* Songwriters: Derik J. Johnson / Brooke Valentine / Andrew Wyatt. Whatcha Lookin' At lyrics © Kobalt Music Publishing Ltd., Songtrust Ave
** Songwriters: Igor Gordiyenko. I Don't Trust My Friends lyrics © DistroKid
*** Comprehensive regulatory regimes like this typically recognise certain de minimis and community-oriented safe-harbours.
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