Social news site Reddit announced on Thursday it will let users earn cryptocurrency by contributing content and participating in discussions on the service. Many in the crypto world hailed the news as a major milestone, pointing to the hundreds of millions of Reddit users who could potentially embrace digital currency.
The actual impact of Reddit’s move is likely to be muted, however, owing to how the site is awarding the cryptocurrency, and the ongoing regulatory scrutiny of crypto.
As it turns out, Reddit will offer digital currency on only two of its many “sub-Reddits”—the site’s discussion forums devoted to specific topics. The first of these, unsurprisingly, is a sub-Reddit for cryptocurrency, while the other is dedicated to chatter about the online game Fortnite.
Contributors to the sites will receive one of two currencies Reddit has minted (known as Moon and Brick) and which it will track on a popular blockchain called Ethereum—a digital ledger technology similar to Bitcoin. Unlike Bitcoin, however, the new currencies can only be spent on Reddit to acquire badges and other trinkets and can’t be used as a form of money more broadly.
This may ensure Reddit stays in the good graces of financial regulators, who have looked dimly on more ambitious digital currency projects by other social media sites like Facebook and the messaging app Telegram. In the case of Telegram, the company’s CEO this week announced it was canceling plans to sell millions of dollars’ worth of tokens called Grams. Telegram’s announcement came after a judge backed the Securities and Exchange Commission’s position that the Grams sale appeared to be an unregulated investment scheme.
By contrast, Reddit’s decision to restrict the Moon and Brick currencies to its own website means they are more akin to loyalty points, or the digital “gold” users of the site have long been able to give to one another.
“It’s a form of in-app rewards points where no one is treating it as an investment—putting it on a blockchain doesn’t turn it into one,” says Preston Byrne, a cryptocurrency authority at the law firm Anderson Kill.
Byrne cautions, however, that Reddit could face scrutiny down the road if it distributes the cryptocurrencies more broadly, or if the “Moons and Bricks” begin to take on value in the real world.
In response to a query from Fortune about the future of its digital currencies, a Reddit spokesperson described them as an experiment.
“We continuously run experiments to explore features that engage our users and communities. With Community Points, we’re working exclusively with two communities to test this feature and gather feedback from our users,” said the spokesperson.
The upshot, according to Byrne, is that the Reddit initiative is not a game changer for cryptocurrency adoption. He notes it doesn’t provide a compelling new use case, or a reason for non-crypto fans to adopt it. Byrne did, though, praise the Reddit experiment as a “cool development.”
Reddit’s gambit may prove useful in the long run, providing the site with a beachhead from which to launch a broader and more versatile cryptocurrency in the future—when, and if, regulators’ attitudes change.
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