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It is time for the US to create a ‘Ripple test’ for crypto

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It is time for the US to create a ‘Ripple test’ for crypto

Most crypto enthusiasts are less than pleased with the United States Securities and Exchange Commission’s past approach to crypto. This is not because legitimate businesses oppose regulation but because of the breadth, complexity and uncertainty associated with the current regulatory regime. Even in the context of general discontent, few actions by the SEC have engendered as much widespread criticism as the Dec. 22, 2020 complaint that initiated a civil enforcement action against Ripple Labs and two of its executives.

Not everyone opposed the action. For example, Coin Center, a pro-crypto nonprofit advocacy and research group, declined to argue against the idea that XRP is a security. In my previous Expert Take, I suggested that the case was consistent with prior SEC enforcement initiatives and the Howey investment-contract test, simply known as the Howey test, which has long been used by the SEC to determine when crypto assets are securities.

On the other hand, there are plenty of voices condemning the SEC’s case. This includes complaints by former SEC official Marc Powers, current SEC Commissioner Hester Peirce, and a pending lawsuit arguing that Ripple’s XRP token is not a security, in which thousands of XRP holders have sought to participate. The Regulatory Transparency Project, a nonprofit, nonpartisan group associated with the Federalist Society, sponsored a teleforum on June 24 titled “SEC v. Ripple Labs: Cryptocurrency and ‘Regulation by Enforcement.’” With a preenrollment of more than 500 members of the public, the audience was overwhelmingly unhappy (and unimpressed) with the SEC’s action against Ripple and its XRP token.

This general dissatisfaction with the Ripple case, often denigrated as “regulation by enforcement,” has led some to call for the development of a “Ripple test” to more clearly articulate how securities laws should apply to crypto assets.

Who is calling for a Ripple test?

The label of a Ripple test might have first been used in a specious post from Dec. 22, 2020 falsely claiming that the SEC was abandoning the Howey test in favor of an approach that reportedly required “new companies to operate for eight years to find out if what they’re doing violates securities law.” However, more thoughtful commentators have joined the call for a Ripple test to prevent businesses from operating for years without knowing whether they might be called into court for having run afoul of U.S. securities laws.

On May 18, Roslyn Layton, a senior contributor and well-respected technology policy writer for Forbes, publicly called for a Ripple test to “stop the SEC’s overreach on cryptocurrency.” Part of the overreach she identified was the SEC’s claim that it could initiate an action reaching back to sales that started more than seven years ago, potentially leading to a fine of billions of dollars. Layton’s response was that “those seven years have a broad public record of refusal by the SEC to provide any clarity over XRP.” She noted, convincingly, that during those years, the SEC declined to announce how it intended to treat Ripple’s XRP token.

Since the original piece in Forbes, several other commentators have joined the call for a “Ripple test.” One published opinion, authored by George Nethercutt Jr. — a former member of Congress — noted:

“Recent calls to establish a more appropriate standard for technologically complex digital assets have turned into a firestorm since the Ripple case was filed. Some tech policy experts closely following the case have called for a ‘Ripple Test’ to replace Howey.”

Curt Levey, president of the Committee for Justice — an organization devoted to advancing constitutionally limited government and individual liberty — also raised the Ripple test during the Regulatory Transparency Project’s June teleforum, noting that the need for a Ripple test is continuously evolving regardless of the outcome of the SEC lawsuit.

Existing approaches that might become the Ripple test

The difficulty, of course, is in fully explaining what a Ripple test might entail (other than not being the Howey test, of course).

The utility token approach

One possibility is to look at the functionality of the underlying asset, essentially resurrecting the utility token analysis. At one point, commentators made a concerted effort to distinguish between utility and security tokens. Unfortunately for entrepreneurs, as former SEC Chairman Jay Clayton noted, under the SEC’s approach, “Merely calling a token a ‘utility’ token or structuring it to provide some utility does not prevent the token from being a security.”

Some states, however, have adopted a utility token analysis to determine how such assets should be regulated. Not surprisingly, Wyoming, the most crypto-friendly state in the nation, enacted the “Wyoming Utility Token Act” back in 2017 — and passed two related house bills in 2019 — which allows issuers to proceed with tokens created for a consumptive purpose. In order to satisfy the requirements of this act, the predominant purpose of the token must be consumptive; the token cannot be marketed as a financial investment; and there either must be a reasonable belief that the token is sold to the initial buyer for consumption, the consumptive purpose must be available at or near to the time of the original sale, or the original buyer must be precluded from reselling the token until the consumptive use is possible. Tokens that comply with these requirements can be sold after the issuer files a notice containing specific but limited information with the secretary of state and pays a $1,000 fee to cover the costs of administering the statute.

Similarly, Montana has chosen to specifically exempt utility tokens (i.e., those with a consumptive purpose) from its securities laws. Section 30-10-105(23) of the Montana Code exempts utility token transactions from the registration requirements under state law. This provision requires the token to be designed primarily for consumptive purposes and not marketed for speculative or investment purposes. In addition, resales of the tokens are prohibited until the consumptive purpose is possible, and initial purchasers must acknowledge their intent to use them for the consumptive purpose. Colorado, through its Digital Token Act, has also chosen to exempt the issuance of tokens with a primarily consumptive purpose from the state’s securities laws.

While it would probably take an act of Congress to encourage (or force) the SEC to move in this direction, a Ripple test adopting the utility token (or consumptive purpose) approach could have precluded the application of securities laws to Ripple’s XRP tokens.

Excluding crypto assets that are regulated as virtual currency

An alternative Ripple test could limit the scope of the SEC’s authority under the securities laws so that an interest determined by the Financial Crimes Enforcement Network (FinCEN) to be a currency is not a security. In 2015, FinCEN and Ripple Labs Inc. made headlines with the announcement of the first enforcement action under the Bank Secrecy Act against a digital currency exchanger. As part of the release announcing the imposition of a $700,000 penalty against Ripple, FinCEN explained that the actions of the company were problematic because it had sold “its virtual currency, known as XRP,” without registering as a money services business.

This determination by FinCEN led commentators to widely speculate that XRP could not also be a security. There is certainly a logic to that position, as the settlement with FinCEN allowed Ripple to continue its operations and sales, which presumably should not have happened if the sales were illegal under federal law. Despite the existence of such commentary, the SEC remained quiet about how XRP should be regarded, even while its officials made public statements indicating first that Bitcoin (BTC) was not a security and then that Ether (ETH) was also outside the scope of securities laws.

Given this history, it is understandable that the decision of the SEC to initiate litigation against Ripple has been particularly polarizing. That decision could have been forestalled if the courts decided to remove digital currencies from the ambit of securities laws, or if the SEC reached that same conclusion.

However, those alternatives seem unrealistic, meaning that it would likely take an act of Congress to give the Department of the Treasury and FinCEN exclusive authority over digital currencies, thereby limiting the SEC’s authority. This approach could easily be identified as a Ripple test, as the impetus for this change is SEC vs. Ripple and the change would clearly preclude the SEC’s decision to act against Ripple and its XRP token.

A statute of limitations

A significantly more limited response, which could also be called a Ripple test, might involve something as simple as limiting how late the SEC can act after the commission becomes aware of the distribution of an interest it regards as a security. Even if the SEC was not fully aware or did not understand what Ripple was doing when it began marketing XRP tokens in 2012, clearly there was a general understanding of the company’s activities by 2015 when the FinCEN settlement was announced. Even so, the SEC did not initiate its enforcement proceedings until Dec. 22, 2020. It is this delay that has been the most widely criticized.

For claims by private plaintiffs under the Securities Act of 1933, Section 13 requires that the suit be initiated within one year of the violation as to that particular person and in no event more than three years after the security was first offered to any purchaser. This is a reasonable balance between the need of purchasers to obtain redress and some need for eventual certainty and closure for the issuer. However, the federal securities laws currently provide no statute of limitations on the right of the SEC to initiate enforcement actions. Presumably, it will take an act of Congress to amend the law to limit the SEC’s authority to act, but the very fact that the SEC has been willing to sue Ripple for decisions and actions initiated more than seven years earlier suggests that such action could be justified.

Problems with existing approaches

There are some obvious benefits to a Ripple test, not the least of which would be to remedy what is seen by many as a serious overreach by the SEC. Increased certainty would also be a sizable benefit to legitimate crypto entrepreneurs, but there are some problems with each of the approaches identified above.

First, a test that is focused on whether a particular crypto token has utility (or consumptive value) in order to determine whether or not the asset in question is a security may leave members of the public with inadequate remedies in the event that there is fraud. An alternative to saying that utility tokens are not securities would be to provide a simple exemption from registration for utility tokens. This would at least allow the anti-fraud provisions of the securities laws to continue to apply. A problem with saying that utility tokens are exempt is that it might be too easy for issuers to evade applying the securities laws by pretending that tokens are being sold for a consumptive purpose when the real hope is that they will be bought by speculators, pushing the price up.

In addition, it is likely to be difficult to determine whether the purpose of a token is “primarily” consumptive or whether it was really marketed as an investment rather than on the merits of its promised utility. Each of these are reasons that using a straight-forward utility test as the Ripple test might be problematic.

There are also problems with saying that an interest cannot be a security if it is regulated as a currency by FinCEN. First, FinCEN does not regulate to protect against fraud in the sale of interests, so this approach could easily leave members of the public who are scammed without a remedy. Because federal agencies are protective of their jurisdiction, this approach could also produce a race to regulate, which might not lead to the optimal results.

Alternatively, if FinCEN has the ability to determine that a crypto asset is a digital currency even after the SEC has acted first, this could lead to the very kinds of uncertainty and inconsistency that crypto entrepreneurs protest against under the current system. Because the mission of FinCEN is so different from that of the SEC, there would seem to be good reasons for allowing both to retain some jurisdiction in the space.

Finally, there are also some issues around setting a strict statute of limitations for enforcement actions. The SEC has limited resources, and when a new class of assets arises, it takes time to understand what those assets entail. It may have taken the SEC a considerable time to figure out exactly what was going on with XRP tokens precisely because they do have some utility and they work in an extremely complicated space. It is difficult to know what statute of limitations would be fair, and if the issuer in question (or its affiliates) continues to sell the asset, the SEC could still have jurisdiction over more recent sales, leading to the anomalous situation where some sales cannot be attacked while other sales are treated as illegal.

An alternative approach

The preceding discussion raises the question of what alternative approaches might work better. First, because it is absolutely clear that there are bad actors in the crypto space, it is important to have an active federal regulator that can intervene when members of the public are defrauded. The SEC has the resources and experience to enforce the anti-fraud provisions of the securities laws. This can be accomplished without the problems that are exemplified by SEC vs. Ripple if the regulatory approach is changed to recognize a broad, consistently applied exemption from registration for offerings that meet certain requirements.

The most obvious requirement for such an exemption is that it should be limited to issuers that are not subject to a stop order and have no past history of securities violations and that have no affiliates or control persons that have been convicted of a felony or fraud in the recent past. A “bad actor” disqualifier already appears in other exemptions, so it would not be unusual for this to be included in a new crypto transaction exemption.

Second, it makes sense for any issuer to have to notify the SEC of a planned sale or distribution of crypto assets. The notice does not need to include a huge amount of information, but it should include such things as the terms of the issuance, the consideration that they are paying and the general terms and functionality of the asset specifically including the rights that purchasers are acquiring as a result of ownership of the asset. In addition, not only does the SEC need information about the general terms and functionality of the blockchain on which the crypto assets are issued, that same information needs to be publicly available at the time of issuance. The information that must be readily available should include the quantity of assets authorized, the number that are controlled by the issuer or its affiliates or control persons, and the general conditions that must be met before assets are issued or the issuer can sell the assets as well as any limits on resale.

It might also be appropriate to have reasonable restrictions on the nature of the underlying program. One substantive requirement that makes sense is that the issuer should not have the unilateral right to modify the terms of the underlying blockchain or programming. It also makes sense to require that the crypto assets be designed with a consumptive purpose and that the tokens should be functional at the time of the sale. (Absent a consumptive purchaser, the only likely justification for purchase is speculation on future profitability.) Similarly, the proceeds of the sale should not be needed or intended to support development of the token’s functionality (provided that the general assets of the issuer may be used to support additional or improved functions, even if part of those assets are derived from the sale of the crypto assets). This is also intended to ensure that the tokens are being purchased because of the intended functionality rather than in the hopes that the issuer’s efforts will increase their value as an investment. As an alternative to this approach, it could also be acceptable if the functionality of the asset is intended to be available reasonably quickly and that resale by initial purchasers is precluded until such functionality develops.

Another requirement should be that the issuer specifically avoids selling the token by promoting the possibility of appreciation or profitability, or otherwise as a speculative investment. Finally, to avoid the possibility that this exemption is used to evade the securities laws, the asset should not give the purchaser a right to any share of or interest in the management, profits or assets of the issuer and must not be created primarily to evade application of the securities laws. These restrictions seem necessary to limit the new exemption in a reasonable manner while still offering a broad-based exemption for many assets.

Conclusion

These suggestions may be just another version of a Ripple test, they may be seen as a modified utility token test, or they may be regarded as something else. Regrettably, given the SEC’s actions to date, it will probably take an act of Congress to move regulation in this direction. Nonetheless, the need for a clearer, more reasonable path to regulatory compliance is illustrated by SEC vs. Ripple, where no fraud is alleged, yet the SEC waited to bring an enforcement action for more than seven years after the company began selling its token.

This article is for general information purposes and is not intended to be and should not be taken as legal advice.

The opinions expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph nor the University of Arkansas School of Law or its affiliates.

Carol Goforth is a Clayton N. Little professor of law at the University of Arkansas, Fayetteville, School of Law.

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Thanks to Bauhaus, I totally get NFTs now

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Thanks to Bauhaus, I totally get NFTs now

On Friday of last week, I got a press release from Grace at a music and public relations firm called 23, and Grace wanted to know if I was interested in running a feature on a series of nonfungible tokens, or NFTs.

I almost instinctively replied “I am not, as I am actually exhausted reading these pitches about the half-baked efforts of minor celebrities to get a fat payday thanks to rich cryptopreneurs with more Ether (ETH) than sense,” and then I’d usually rant, and rant, and move on. Except I’m not really that rude to well-intentioned PR people who have no idea that I get 50 of these every day.

And yeah, it was a pitch about minor celebrities.

But I didn’t move on, as this time they happen to be my minor celebrities, and all I can suddenly think about is driving down to California next week to go bid on their NFT and maybe have a drink or two with the band, perhaps slipping in a sly reference to their music to prove that yeah, I was really there, and I’m not some pseud speculator — I’m one of you.

The band in question is Love and Rockets, which is already a lie — actually it’s Bauhaus. But despite feeling like The Oldest Person in Crypto, I’m not quite old enough to have truly appreciated Bauhaus as they developed gothic rock, because they split up when I was 12. And so, Pete Murphy — sorry mate, but you’re not part of this, even though you’re a genius.

But you literally can’t have Bauhaus without Love and Rockets because Daniel Ash, Kevin Haskins and David J were in both bands. Ergo, anything that Bauhaus produces must also be produced by Love and Rockets, and because Love and Rockets are the band that got me through being a teenager, I now totally get NFTs — even if the NFT is from Bauhaus. You’re following, right?

And I now get NFTs on a truly visceral level — on that acquisitive, grabby, FOMO level that has driven prices to insane heights as people buy up Tony Hawk and Snoop Dogg and Grimes and Paris freaking Hilton and Ronaldinho and Gianluigi Buffon and Robbie Fowler and Every Other Retired Footballer You Care To Name and Soulja Boy and William Shatner… you get the picture.

In March 2020, when I was putting together a series of articles on crypto art for Cointelegraph Magazine, I almost bought a piece.

It was a Josie Bellini. And when I say I almost bought a piece, I mean that in my head, I was close. I bid around 25 ETH on it, which I justified to myself as both an investment and an expression of solidarity with the artists, all of them, as it was immediately apparent to me that the crypto art community was by far the nicest, most thoughtful, most supportive community in the whole industry. Nothing has happened to dissuade me of that, by the way.

Related: NFTs are a game changer for independent artists and musicians

Anyway, at the time, 25 ETH was about $3,000, and that’s crazy money for anything arty. But the fact is I probably never stood a chance. I was bidding against MetaKovan, the guy who dropped $69 million on a Beeple this year, and I suspect it didn’t really matter what I bid.

But even though I loved the work, it was at a slightly detached level. I was looking for a piece of art to buy, and Josie’s spoke louder than anything else in the store. It didn’t find me; I found it. And I’m not 100% sure that’s how you buy art.

So, back to Love and Rockets, or Bauhaus if you must, and specifically to this teenage student living in a single room on the top floor of a boarding house in The Mumbles outside Swansea, trying to learn Russian for reasons that made no sense then, and that make no sense now. He’s been listening to Love and Rockets for years on straggly cassette tapes, he’s decided that his life’s motto is going to be Live the life you love / Use a god you trust / And don’t take it all too seriously, and his copy of Seventh Dream of Teenage Heaven got chewed up in a fight with a Talbot Horizon (Americans, read: Dodge Omni), and he’s basically penniless. I mean, really freaking poor — hitchhiking everywhere, living off winnings dispensed by the trivia machine at the university. And with (no exaggeration) the last 50 quid in his account, he goes out and buys all four Love and Rockets albums on CD in a kind of late-teenage fuck-you to reality, knowing that food — perhaps even drink — will not get him through this, but A Private Future just might.

This is how art finds you.

It finds you where you truly are. Or maybe where you truly were, but where you can be transported in a fraction of a second by a few notes and the memory of a truly terrible choice involving your hair, an aerosol and a girl named Caroline.

To the astonishment of literally no-one, this guy was a Love and Rockets fan.

And as soon as I imagined owning some moment from the history I shared with the members of Love and Rockets, the art found me, and instilled a powerful, dramatic urge to connect. It brought me closer to my past.

I realize now that NFTs — and I’m talking about the limited, expensive ones here — are already divided into two camps: the material and the experiential. There’s the CryptoPunks, which are kind of like baseball cards and which are basically a speculative instrument because, let’s face it, the aesthetic isn’t selling these things for $10 million or more.

And in the other camp, there’s the memorabilia, the ars gratia artis, the one-off moments from NBA Top Shot. The experiential NFTs are selling because they trigger responses, memories and emotions… People who wouldn’t spend $5,000 on art might spend it on music, people who wouldn’t spend $5,000 on music might spend it on sports tickets, people who wouldn’t spend $5,000 on sports might spend it on land in a metaverse next-door to a friend, and people who wouldn’t spend $5,000 on virtual land might donate it to charity.

Detractors may not get it because they’re focused on the material NFTs — $69 million is a lot to pay for any artwork, never mind one with a mixed critical reception — but part of MetaKovan’s justification for the price was that it enabled him to become part of art history and to publicly celebrate the fact that an art world dominated by wealthy, white, Western collectors is changing to be more inclusive. MetaKovan bought himself a legacy.

People are buying experiential NFTs because they crave connection, not just because they want to get rich. We’re suffering through an increasingly disconnected experience of our world, and those things that bring us closer to our communities and heroes are valuable. (There’s no doubt in my mind that social tokens are going to take off in a big way in 2022, if not before.)

Art, music, sports… it can all have meaning. A sense of where you were and what you were doing at the exact moment in time that you were a different person. Maybe happier, maybe sadder, maybe less evolved or maybe more carefree. Experiential NFTs are a way to connect more deeply with the experiences and emotions that shape us — to literally own the moment.

Related: Haute couture goes NFT: Digitalization at Paris Fashion Week

I probably won’t go down to California for the show — I doubt I have enough Ether to buy any of the Bauhaus NFTs. I was going to hit up Coldie, who’s collaborating with Bauhaus on this project (he’s a wonderful artist and a mainstay of the crypto art community who I wrote about for that Art Week feature last year) but I didn’t want to put him in the awkward position of having to tell me to piss off and pay up.

And what would I do there anyway? You should never meet your heroes, especially not as a fanboy journalist.

Even as I write this, I’ve begun to find ways to abstract away my emotional response to the press release Grace sent last week. It’s Bauhaus, not Love and Rockets, no matter how hard I might try to convince myself. Bela Lugosi’s Dead never really spoke to me. Goth rock isn’t my thing anymore. I’d probably try and get Daniel Ash to fight Pete Murphy. I never really lived up to the motto anyway.

But hey. Thanks, Grace. Thanks to Pete, Kevin, David and Daniel. Thanks, Coldie. Thanks for giving me a moment alone with my teenage self.

I’m going to listen to Saudade right now because that seems appropriate.

Bauhaus and Coldie’s debut NFT collection will be featured in an IRL auction party at Bright Moments NFT Gallery in Venice Beach on Aug 10. Everyone who attends the IRL show will receive 3D glasses to view the work. The three-NFT series will drop on Nifty Gateway on August 10th to coincide with the show.

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VGX, PERP and LUNA rally while Bitcoin price struggles to hold $38K

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VGX, PERP and LUNA rally while Bitcoin price struggles to hold $38K

Last week’s momentum in Bitcoin has all but faded as (BTC) price is once again below the $39,000 level with bears and bulls locked in a heated battle for market dominance. 

Data from Cointelegraph Markets Pro and TradingView shows that while Bitcoin price falters, several altcoins like Voyager Token (VGX), Perpetual Protocol (PERP) and Terra (LUNA) have seen double-digit gains.

Top 7 coins with the highest 24-hour price change. Source: Cointelegraph Markets Pro

VGX/USD

The top performer over the past 24-hours has been Voyager Token, a cryptocurrency brokerage platform that offers retail and institutional investors a secure place to purchase, trade and lend crypto assets.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for VGX on July 31, prior to the recent price rise.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. VGX price. Source: Cointelegraph Markets Pro

As seen on the chart above, the VORTECS™ Score for VGX climbed to a high of 75 on July 31, around 50 hours before the price increased 54% over the next day.

The sudden surge in momentum for VGX followed Voyager’s acquisition of Coinify, a crypto trading platform, and the launch of the VGX web swap 2.0 and staking portal.

PERP/USD

Perpetual Protocol, a decentralized perpetual contracts protocol that includes an on-chain decentralized exchange (DEX) and up to 10x leverage, was the second-best performer of the past 24-hours.

According to data from Cointelegraph Markets Pro, market conditions for PERP have been favorable for some time.

VORTECS™ Score (green) vs. PERP price. Source: Cointelegraph Markets Pro

As seen on the chart above, the VORTECS™ Score for PERP began to pick up on June 29 and climbed to a high of 80 on July 31, around 48 hours before the price increased 30% over the next day.

The increase in price, as well as trading volume, come on the heels of the release of Curie, the v2 upgrade of the Perpetual Protocol which “dramatically improves capital efficiency and increases fee capture for liquidity providers.”

Related: Bitcoin price dips below $38K, with bullish traders eyeing a new higher low next

LUNA/USD

Tuesday’s third top-performer is Terra, a protocol that specializes in fiat-pegged stablecoins like TerraUSD (UST) to power a price-stable global payment system.

Data from Cointelegraph Markets Pro and TradingView shows that the price of LUNA has rallied 28% from a low of $11.13 on Aug. 2 to an intraday high at $14.21 on Aug. 3 as its 24-hour trading volume increased by 58% to $714 million. 

LUNA/USD 4-hour chart. Source: TradingView

Excitement for LUNA has been building since last week following the addition of TerraUSD (UST) to DinoSwap and has continued on Tuesday thanks to an ongoing community vote to whitelist bETH as collateral on Anchor Protocol which will bring Ether (ETH) staking rewards to the Anchor ecosystem.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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BTC payments coming to certain Quiznos shops, thanks to Bakkt collaboration

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BTC payments coming to certain Quiznos shops, thanks to Bakkt collaboration

Quiznos customers will soon be able to pay in Bitcoin via Bakkt’s app at certain Colorado locations.

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BTC payments coming to certain Quiznos shops, thanks to Bakkt collaboration

An upcoming collaboration between Bakkt and Quiznos will allow customers to pay for meals at certain locations with Bitcoin (BTC).

Customers will be able to pay in BTC at certain Quiznos shops in Colorado’s capital as part of an initial test run, according to a public statement on Tuesday. “The pilot will be available at select Quiznos locations across the Denver market, including the high-traffic Denver airport location, starting in mid-August,” the statement said.

Folks will be able to pay with Bitcoin via Bakkt’s app — a versatile hub for holding and spending Bitcoin, as well as managing reward points and other features. Quiznos is owned by REGO Restaurant Group. REGO’s president, Mark Lohmann, said in a statement:

“Partnering with an innovative platform such as Bakkt is appealing to us for a number of reasons, primarily because it allows us to accept bitcoin directly at the point of sale as part of a quick and seamless transaction […] As we continue our digital transformation journey and respond to mobile and millennial consumer demand for alternative and cryptocurrency payment options, we are excited to offer yet another accessible way for customers to buy a meal, in this case, through the Bakkt digital asset wallet.”

The test run comes with an extra perk as well. Quiznos goers will earn $15 of free Bitcoin if they get Bakkt’s app, purchase some BTC on it and then spend that BTC at a participating Quiznos shop, the statement included.

“Through a partnership with Bakkt, merchants and franchisees have the opportunity to accept bitcoin payments from consumers while still benefiting from a cash-settled experience,” the statement said. The statement was not clear on whether or not Quiznos would sell the received BTC right away.

Comments from Bakkt’s chief revenue officer, Sheela Zemlin, however, better explained the outcome of the BTC that Quiznos will receive. “Payment infrastructure is powered by the Bakkt platform, so while Quiznos will accept customers’ bitcoin payment via the virtual Bakkt Card, Bakkt settles in fiat with Quiznos,” Zemlin told Cointelegraph on Tuesday. 

Zemlin also confirmed that the pilot Quiznos locations will only accept Bitcoin through the Bakkt app for payments. “The REGO-owned Quiznos chain of restaurants has selected Bakkt as its crypto payments partner,” Zemlin explained. “Payment can be made by bitcoin now and a growing number of crypto assets in the months to follow.”

Updated Aug. 3, 2021, 20:30 UTC: This article was updated to included comments received from Bakkt after initial publication. 

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