8 ms·

> I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise fu

by iMuzz 9y ago

> I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects. > We at the SEC are committed to promoting capital formation. The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. I don't know much about Jay Clayton (SEC Chairmain) but he seems to be taking a very pragmatic stance on tokens. From what I gather, he's saying that some of these tokens should be classified as securities, while others should not. And we as investors should be be diligent to probe the creators to see if these tokens are subject to regulation and are legal. This is amazing! The SEC haven't quite stepped in yet. But I fully expect them to. And this gives some great insight into what we can expect in the future.

Alex3917 9y ago
> he's saying that some of these tokens should be classified as securities If by 'some' you mean that some future tokens might be able to be offered for sale legally, then yes. But he also just declared basically 100% existing token operations to be criminal.
- Frogolocalypse 9y ago
  Not 100%, but a lot, for sure. I definitely read it as most.
wmf 9y ago
he's saying that some of these tokens should be classified as securities, while others should not. Gotta love the unlimited supply of optimism in the cryptocurrency world. Every single existing token is either a security or a commodity, but people still think they can squeeze through the "utility token" loophole.
- iMuzz 9y ago
  > Every single existing token is either a security or a commodity My optimism could totally be misplaced! But here's an excerpt from the SEC statement that seems to go beyond your "security or commodity" classification. > A key question for all ICO market participants: “Is the coin or token a security?” As securities law practitioners know well, the answer depends on the facts. For example, a token that represents a participation interest in a book-of-the-month club may not implicate our securities laws, and may well be an efficient way for the club’s operators to fund the future acquisition of books and facilitate the distribution of those books to token holders.
  - wmf 9y ago
    But no actual tokens work that way because no one would get rich off them.
    - maneesh 9y ago
      Volts work that way. Earn crypto for doing healthy habits. Use it to unlock new apps and courses for behavior change. It becomes a lot easier when you realize money isn't real, it's a constraint. Like oxygen, it only matters when you don't have it --- once you do, it becomes irrelevant -- a story that allows you to represent incentives to do positive deeds. https://pavlok.com/volts https://pavlok.com/volts
      - wmf 9y ago
        And you're the founder/CEO; what a coincidence!
charlesdm 9y ago
They seem to be approaching things in quite a pragmatic way, which is great. This is a space that will grow in the coming years, and while there will be growing pains / abuses along the way, this might end up being a new, valid and accepted method of raising international funding. All the actors just need to get comfortable with this and figure out the best way to approach this.
Frogolocalypse 9y ago
I think that is a very considered and wide ranging statement. The proof is in the pudding though. He looks like he has called out some ICO's, but until enforcement proceedings start, it is still not clear. I can't see how any pre-mined ICO, like ripple, wouldn't be treated like a security given those statements. As a long time crypto investor, even i recognise that ico's are out of control. It is my opinion that if you can't mine it yourself, or get someone independent from the issuer to do it for you, it's a security in everything but name. Any presale token is simply a security towards the coins once released. I can't see how that isn't a security.
- lojack 9y ago
  I don’t understand why being premined makes any difference? A company could easily create an equity pool and a new mineable currency, and make that currency worth a proportional amount of equity. That would very clearly fall under the umbrella of security. Similarly someone could create a premined currency and evenly distribute it to anyone who asked for it, in exchange for nothing with no guarantees about it being redeemable for anything. That may not be considered a security. The lines become much more blurred when you’re talking about a staked currency where an ICO is necessary to help evenly distribute the coins which are then mined. Honestly, as annoying as this is, the definition is security is so broad that I find it hard to picture any cryptocurrency not being defined as a security.
  - wbl 9y ago
    If you buy bitcoin you aren't buying it from the author of the bitcoin client to fund further development. I'm going to say not a security transaction.
    - ojr 9y ago
      the founder of bitcoin gave himself/herself a mining headstart with low difficulty, this can be seen as a founder reward
      - 9y ago
everdev 9y ago
Important second line to that quote: "A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, our securities laws must be followed" They're saying it's fantastic, just do it legally. And for any offering that passes the Howey Test, that means registering with the SEC.
- couchdive 9y ago
  and probably requiring Accredited Investors only at some point, which probably 90 percent of crypto folks aren't, myself included. Accredited investors must make 200 to 300k annual (dual income allowed) and/or have 5 mill in tied up assets and/or a net worth of over 1 mill.
  - dahdum 9y ago
    It's just the income or $1M net worth excluding primary residence. The $5M is for business entities.
    - couchdive 9y ago
      thanks for the more detailed and accurate info!
  - AnkhMorporkian 9y ago
    90 percent? Probably close to 99. While a significant portion of crypto is probably owned by rich people, the vast majority of actual owners of crypto is owned by people who make far less than that. For every millionaire out there who is investing in crypto, there are a few hundred people who just want to buy things off the dark web.
modeless 9y ago
I think this is more negative for ICOs than your quotes imply. Look at this: > By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Basically, almost all ICOs so far are illegal. He says that it's possible to make an ICO that isn't illegal by following SEC rules, but I would be surprised if a single existing ICO actually qualified because most of the benefit of doing an ICO comes from not complying with the regulations.
- ikeboy 9y ago
  Most of the benefit of doing an ICO is that investors are throwing a ton of dumb money into ICOs.
  - modeless 9y ago
    Exactly. And SEC regulations are designed to stop dumb money from going into risky investments. If you comply then you can't cash in on that dumb money and there's no point to doing an ICO.
    - ikeboy 9y ago
      A lot of that dumb money is being put in by wall street, so not sure you're right.
      - modeless 9y ago
        This is not my impression. It seems to me that the dumb money is people who made early fortunes in crypto or regular people looking to ride the next pump and dump. If Wall Street money is coming in it's mostly to take advantage of the dumb money for a quick profit, for example by getting preferential pricing or timing so they can sell to later investors).
        ikeboy 9y ago
fergie 9y ago
If nothing else, the current bitcoin adventure is raising a general awareness of the nature of currency- that is, something that primary exists to be means of exchange, and not something that primarily exists to store value. It seems obvious that ICOs should be treated as the sale of securities- its somewhat reassuring to see the SEC endorsing this view.
notyourday 9y ago
> This is amazing! The SEC haven't quite stepped in yet. But I fully expect them to. And this gives some great insight into what we can expect in the future In my view, the biggest issue that we currently have is that SEC is not going after attorneys and accountants who are facilitating these schemes. Do note that I'm not talking about a company performing ICO hiring a law firm to do it correctly, crossing the Ts and dotting the Is. What I'm talking is SchmoeCo going to a law firm specializing in ICOs ( sidebar: can you even believe that there are now law firms that specialize in ICOs?! ) basically disclosing that their ICO is a gigantic fraud scheme and those law firms and accountants help them to pull off this scheme, often for a percentage of the money raised. Going after those firms will relegate the ICO scams and frauds to the pink sheet pump and dump scheme level while letting the legitimate companies to use ICOs to raise money for legitimate even if very speculative projects.

by iMuzz 9y ago

Alex3917 9y ago

> he's saying that some of these tokens should be classified as securities If by 'some' you mean that some future tokens might be able to be offered for sale legally, then yes. But he also just declared basically 100% existing token operations to be criminal.

Frogolocalypse 9y ago
Not 100%, but a lot, for sure. I definitely read it as most.

wmf 9y ago

he's saying that some of these tokens should be classified as securities, while others should not. Gotta love the unlimited supply of optimism in the cryptocurrency world. Every single existing token is either a security or a commodity, but people still think they can squeeze through the "utility token" loophole.

iMuzz 9y ago
> Every single existing token is either a security or a commodity My optimism could totally be misplaced! But here's an excerpt from the SEC statement that seems to go beyond your "security or commodity" classification. > A key question for all ICO market participants: “Is the coin or token a security?” As securities law practitioners know well, the answer depends on the facts. For example, a token that represents a participation interest in a book-of-the-month club may not implicate our securities laws, and may well be an efficient way for the club’s operators to fund the future acquisition of books and facilitate the distribution of those books to token holders.
- wmf 9y ago
  But no actual tokens work that way because no one would get rich off them.
  - maneesh 9y ago
    Volts work that way. Earn crypto for doing healthy habits. Use it to unlock new apps and courses for behavior change. It becomes a lot easier when you realize money isn't real, it's a constraint. Like oxygen, it only matters when you don't have it --- once you do, it becomes irrelevant -- a story that allows you to represent incentives to do positive deeds. https://pavlok.com/volts https://pavlok.com/volts
    - wmf 9y ago
      And you're the founder/CEO; what a coincidence!

charlesdm 9y ago

They seem to be approaching things in quite a pragmatic way, which is great. This is a space that will grow in the coming years, and while there will be growing pains / abuses along the way, this might end up being a new, valid and accepted method of raising international funding. All the actors just need to get comfortable with this and figure out the best way to approach this.

Frogolocalypse 9y ago

I think that is a very considered and wide ranging statement. The proof is in the pudding though. He looks like he has called out some ICO's, but until enforcement proceedings start, it is still not clear. I can't see how any pre-mined ICO, like ripple, wouldn't be treated like a security given those statements. As a long time crypto investor, even i recognise that ico's are out of control. It is my opinion that if you can't mine it yourself, or get someone independent from the issuer to do it for you, it's a security in everything but name. Any presale token is simply a security towards the coins once released. I can't see how that isn't a security.

lojack 9y ago
I don’t understand why being premined makes any difference? A company could easily create an equity pool and a new mineable currency, and make that currency worth a proportional amount of equity. That would very clearly fall under the umbrella of security. Similarly someone could create a premined currency and evenly distribute it to anyone who asked for it, in exchange for nothing with no guarantees about it being redeemable for anything. That may not be considered a security. The lines become much more blurred when you’re talking about a staked currency where an ICO is necessary to help evenly distribute the coins which are then mined. Honestly, as annoying as this is, the definition is security is so broad that I find it hard to picture any cryptocurrency not being defined as a security.
- wbl 9y ago
  If you buy bitcoin you aren't buying it from the author of the bitcoin client to fund further development. I'm going to say not a security transaction.
  - ojr 9y ago
    the founder of bitcoin gave himself/herself a mining headstart with low difficulty, this can be seen as a founder reward
    - 9y ago

everdev 9y ago

Important second line to that quote: "A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, our securities laws must be followed" They're saying it's fantastic, just do it legally. And for any offering that passes the Howey Test, that means registering with the SEC.

couchdive 9y ago
and probably requiring Accredited Investors only at some point, which probably 90 percent of crypto folks aren't, myself included. Accredited investors must make 200 to 300k annual (dual income allowed) and/or have 5 mill in tied up assets and/or a net worth of over 1 mill.
- dahdum 9y ago
  It's just the income or $1M net worth excluding primary residence. The $5M is for business entities.
  - couchdive 9y ago
    thanks for the more detailed and accurate info!
- AnkhMorporkian 9y ago
  90 percent? Probably close to 99. While a significant portion of crypto is probably owned by rich people, the vast majority of actual owners of crypto is owned by people who make far less than that. For every millionaire out there who is investing in crypto, there are a few hundred people who just want to buy things off the dark web.

modeless 9y ago

I think this is more negative for ICOs than your quotes imply. Look at this: > By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Basically, almost all ICOs so far are illegal. He says that it's possible to make an ICO that isn't illegal by following SEC rules, but I would be surprised if a single existing ICO actually qualified because most of the benefit of doing an ICO comes from not complying with the regulations.

ikeboy 9y ago
Most of the benefit of doing an ICO is that investors are throwing a ton of dumb money into ICOs.
- modeless 9y ago
  Exactly. And SEC regulations are designed to stop dumb money from going into risky investments. If you comply then you can't cash in on that dumb money and there's no point to doing an ICO.
  - ikeboy 9y ago
    A lot of that dumb money is being put in by wall street, so not sure you're right.
    - modeless 9y ago
      This is not my impression. It seems to me that the dumb money is people who made early fortunes in crypto or regular people looking to ride the next pump and dump. If Wall Street money is coming in it's mostly to take advantage of the dumb money for a quick profit, for example by getting preferential pricing or timing so they can sell to later investors).
      - ikeboy 9y ago

fergie 9y ago

If nothing else, the current bitcoin adventure is raising a general awareness of the nature of currency- that is, something that primary exists to be means of exchange, and not something that primarily exists to store value. It seems obvious that ICOs should be treated as the sale of securities- its somewhat reassuring to see the SEC endorsing this view.

notyourday 9y ago

> This is amazing! The SEC haven't quite stepped in yet. But I fully expect them to. And this gives some great insight into what we can expect in the future In my view, the biggest issue that we currently have is that SEC is not going after attorneys and accountants who are facilitating these schemes. Do note that I'm not talking about a company performing ICO hiring a law firm to do it correctly, crossing the Ts and dotting the Is. What I'm talking is SchmoeCo going to a law firm specializing in ICOs ( sidebar: can you even believe that there are now law firms that specialize in ICOs?! ) basically disclosing that their ICO is a gigantic fraud scheme and those law firms and accountants help them to pull off this scheme, often for a percentage of the money raised. Going after those firms will relegate the ICO scams and frauds to the pink sheet pump and dump scheme level while letting the legitimate companies to use ICOs to raise money for legitimate even if very speculative projects.