Hey Phenoms, in this weeks letter we are discussing

• What is a token 🤔

• Aave launching a native a stablecoin 💸

• Cathie Wood gives her BTC price target 📈

• RFK Jr wants to back USD with BTC 😳

• Is Crypto VC Funding back? 🍾

Thanks for being here and reading along

What the *%? is a Token?

Last week crypto fans popped the champagne as tokens sidestepped being pegged as securities. Judge Torres left us in a cliffhanger, though, not clarifying what they are. Looks like we'll have to twiddle our thumbs till legislation steps in, but don't hold your breath - Analyst Brian Garner warns we could be cooling our heels for years.

What are crypto tokens? Don't expect a clear answer from a crypto zealot, it's like asking a fish to explain water.

In a 2020 ruling, a judge attempted to clear the murky waters: "Cryptocurrencies (sometimes called tokens or digital assets) are a lawful means of storing or transferring value." Not quite enlightening, as he muddled "cryptocurrency," "tokens," and "digital assets", all distinct in the crypto world. Labeling Bitcoin a token, for instance, is asking for trouble.

The same judge painted a Telegram token as "little more than [an] alphanumeric cryptographic sequence." Too vague, we need meat on the bone.

A UK Law Commission report gave it a shot, referring to tokens as “a data structure instantiated within a crypto-token system...". However, this mouthful of tech jargon is about as helpful as a chocolate teapot.

A glimmer of clarity comes from a Bank of International Settlements report, describing tokens as "digital entries [that] integrate records of underlying assets with set rules." Not bad, 8/10. Simon Taylor from Fintech Brain Food goes further, stating "A token is a programmable asset." Bingo, a solid 10/10.

But hang on, introducing "asset" triggers the "investment" alarm, drawing government attention. Tokens: commodities or securities? The Lummis-Gillibrand bill views ‘crypto asset’ as an “electronic asset conferring economic, proprietary, or access rights or powers.” Smells like equities.

Still, what exactly do you own as a token holder? Traditional finance awards ownership through the legal system. Crypto's different, private keys determine ownership. Taylor nails it again: "With a natively digital token, access and ownership are the same thing." In crypto, holding the keys is owning the goods.

The UK Law Commission supports this view, adding that if everyone believes a token offers a claim on earnings, it does indeed confer that ownership.

That said, not all tokens resemble stocks. They could be utility, governance tokens, or even loyalty points. Their nature is multifaceted and fluid. The Law Commission suggests recognizing this diversity and placing crypto tokens in a category of their own: “data objects.” Quite fitting, and I'll give it an 11/10.

So, while we try to pin down these slippery creatures, Judge Torres has at least bought us some time. Let's hope we put it to good use.

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Closing the ledger for now, but the crypto revolution continues. Stay curious, stay bold, and keep chasing those blockchain gains!