Charles Hoskinson and Adam Back clash over Bitcoin decentralisation

Founder Cardano Charles Hoskinson expressed confusion at the SEC‘s stance regarding the agency’s apparent lack of attention to Bitcoin and its treatment of other cryptocurrencies as securities. The response came from industry pioneer and Blockstream CEO Adam Back. 

@IOHK_Charles it’s very simple: Bitcoin did not do an ICO, most people thought it had no value, it was mined from zero, it is decentralised, there is no CEO, ICO warchested “foundation”, incorporation etc. so cardano, eth etc clearly pas howey, Bitcoin is a commodity and does not

— Adam Back (@adam3us) November 27, 2023

Hoskinson questioned the decentralisation of digital gold. He suggested that for a 51% attack, it would take only three subpoenas to the owners of the largest mining pools.

«Explain this [the difference between Bitcoin and other cryptocurrencies], as if I were five years old. Pass the Howey test», — he proposed.

Back responded, pointing to the absence of ICO for digital gold as the reason: why the SEC does not treat it as a security.

«It’s very simple: Bitcoin did not conduct an ICO, most people thought it had no value, the asset was mined from zero, it decentralised, there is no CEO. An ICO is run by a nonprofit organisation, a corporation, etc. This applies to Cardano, Ethereum and others that pass the Howey test, in contrast to Bitcoin, which is a commodity», — wrote the Blockstream CEO.

Hoskinson pointed out to Back the lack of an initial token distribution for Cardano.

«The distribution [of tokens] occurred via an airdrop, then thousands of people who had never met each other traded ADA on exchanges and used Cardano for their projects. The sale of a voucher for another asset outside the United States, priced in Bitcoin terms and in yen, without the participation of at least one American resident, is not an ICO», — Hoskinson retorted.

Cardano’s founder was accused of lying, and investors were reminded of ADA’s price at its 2016 issuance.

Stop lying.

Cardano’s ICO price was $0.0024 per token. Investors were able to acquire ADA with their Bitcoin holdings.

— Bitcoin Lizard ? ∞/21M ⚡ (@Arthur_van_Pelt) November 27, 2023

Back said he was confident that Hoskinson had lawyers who had advised him not to touch on certain topics.

«Premine and airdrop, as well as market making, meet the criteria of an ICO. Plus the obvious dependence of the management team on profit expectations, etc., in line with the Howey test’s conditions», — he noted.

In November, in the SEC’s case against Kraken, the regulator added to a list several tokens it considered unregistered investment contracts, including ALGO, MATIC and NEAR.

In June, the Commission accused Coinbase of violating securities laws. The agency said a number of exchange-listed tokens fit that definition: SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH and NEXO.

IN the SEC’s case against Binance, the regulator classified as securities the following assets: SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO and AXS.

Earlier, Charles Hoskinson and Ripple’s CTO David Schwartz sparred over corruption at the SEC.