Legal Opinion Letter
Subject: Legal Opinion about the legal nature of $COIN™ tokens
I write to provide my opinion on the legal nature of the $COIN™ tokens. This is based on the analysis of the elements of the $COIN™ token and research in accordance with United States security legislation and regulations.
The $COIN™ token is a cryptocurrency and digital commodity created with strict mathematical principles by complex functions and algorithms. Unlike fiat currencies that are printed by central banks, and like other commodities that exist in the world today, COIN has a fixed supply, is inflation-proof, and responds to the basic principles of supply and demand. As a result, many countries have recognized cryptocurrencies as a bonafide commodity that may be held and exchanged by its citizens. For example, in the European Union, it is recognized that cryptocurrencies need their own specific legislation, and therefore there is a new bill (the Regulation on Markets in Crypto Assets) that will very likely regulate the area in the future.
$COIN™ previously held a registered Reg S and CF offering with the United States Securities and Exchange Commission in the Spring of 2018. $COIN™ was proactively deemed as a security to protect the best interests of its holders and the overall company. Since its offering, $COIN™ has not been legally available to trade or exchange and has passed the 12-month transfer restrictions required by Reg S rules 903 and 904.
Similar to Ethereum, a peer in the industry, the Coin network is now operational, live, and is open-sourced for expansion by independent developers in the community. Further growth and expansion of the network will not rely on a single source or party including the COIN XYZ, Inc. company. The power of future decisions in the network has been delegated to the network of $COIN™ token holders. The network was previously influenced by COIN XYZ, Inc.; however, is now controlled by a vast distributed global network of $COIN™ token holders. Coin XYZ, Inc. has elected to convert the $COIN™ token from a security to a utility token as it has met its previous legal obligations. Additionally, for use as a utility to support the operations of the Coin network itself. It is the economic substance of the transaction that always determines the legal analysis, and in this case, in the $COIN™ network – given its decentralized structure, current offers, and sales of $COIN™ are not securities transactions.
Furthermore, when considering the evaluation criteria, it is important to notice that independent actors set the price based upon the principles of supply / demand for reasons deemed necessary by the actors themselves. The company can not support or influence market dynamics / trading. Moreover, Coin’s collateral and agreements explicitly mention that the token is intended for network use. The language in Coin’s previous agreements was created and supported by their original legal counsel (Olshan, Frome, and Wolosky) as well.
The $COIN™ token has multiple and essential functions for the network including:
- The power to vote on proposals to influence and govern the future direction of the network
- To execute smart contract code in the network for network operations, staking incentives, and network governance
Coin XYZ, Inc. has also submitted form C-TR and closed its legal responsibility to deliver periodic reports on financial performance, business developments, etc. as previously required as a security.
Based on a review of existing guidance, precedent, and enforcement actions, Coin XYZ, Inc. believes that $COIN™ tokens no longer meet the US SEC’s Howey Test as a security and/or are no longer subject to enforcement. As Coin’s general legal counsel for global affairs, I share this opinion. In my opinion, it is clear that $COIN™ tokens are not securities and therefore should not be subject to any security enforcement.
Very truly yours,
Anne Nyström Legal Counsel