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21 B.U. J. Sci. & Tech. L. 1 (2015)
Is Bitcoin a Security

handle is hein.journals/jstl21 and id is 9 raw text is: 










                            ARTICLE


                    IS BITCOIN A SECURITY?

                JEFFREY   E. ALBERTS &  BERTRAND   FRY  *




                           TABLE OF CONTENTS

INTRODUCTION                               .................................................. 1
1.   THE  NATURE OF BITCOIN................................. 2
II.  THE  IMPLICATIONS OF BITCOIN BEING A SECURITY .............. 4
      A.   The Securities Act of 1933        ............    .................. 4
      B.   The Securities Exchange Act of 1934...................... 7
      C.   The Investment Company  Act of 1940.     ..........   ............ 7
III. THE  DEFINITION   OF  SECURITY                    ............8.........8
IV.  COMMON TYPES OF SECURITIES           ..............   ............. 9
V.   INVESTMENT CONTRACTS                            ........................ 14
      A.   Investment ofMoney............................              15
      B.   Common   Enterprise................................... 15
           1.  Horizontal Commonality                  ..................... 16
           2.  Broad Vertical Commonality ........................ 18
           3.  Strict Vertical Commonality     ............ ................. 19
       C.  Expectation of Profits Solely From Efforts of the Promoter ......... 20
VI.  CONCLUSION             ...............................   ........... 21


                            INTRODUCTION
   Investor interest in the cryptocurrency' Bitcoin has exploded over the past
two  years.2 The market capitalization of Bitcoin rose from less than $150


* Jeffrey Alberts and Bert Fry are partners in the New York office of Pryor Cashman LLP.
They regularly represent entities in connection with legal issues related to virtual currency
and financial technology. Mr. Alberts is a former federal prosecutor and now leads Pryor
Cashman's White Collar Defense and Investigations Group. Mr. Fry has extensive
experience with securities law and alternative investment vehicles and is co-head of Pryor
Cashman's Investment Management Group. The authors would like to thank Satoshi
Nakamoto for making this article possible.
    The term cryptocurrency refers to a digital currency that relies on the principles of
cryptography to process and validate transfers.
  2  See, e.g., Michael J. Casey & Paul Vigna, Bitcoin and the Digital-Currency
Revolution, WALL ST. J. (Jan. 23, 2015, 12:44 PM), http://www.wsj.com/articles/the-
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