Side note but: I asked here if anyone's actually using an ICO project:
https://news.ycombinator.com/item?id=15901992
Didn't get much traction. :(
Statement on Cryptocurrencies and Initial Coin Offerings
151–160 of 176 posts
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#152Can someone explain to me how his "book of the month" club example is not a security? The managerial efforts of the club managers will increase demand for participation in the club, increasing the value of the token. What am I missing?
> The managerial efforts of the club managers will increase demand for participation in the club, increasing the value of the token.
The value of the token is determined by the value of the books being shipped and the frequency and reliability of their shipment. The club managers do not affect the value of the books themselves, do not claim to affect the value of the books over time, and do not promise to provide a secondary market for those books whereby the price of the books in the future may be greater than the price of the books as delivered and thus the token is not a security representing the books. That the token itself may be privately transferred from one holder to another, without notifying or involving the token manager, doesn't make the token substantially different than, say, transferring your newspaper or magazine subscription to another person, and such subscriptions are clearly not securities.
If you did, instead, promise book token investors that there would be a secondary market for the tokens where they can easily and publicly find buyers for their tokens, and that those book club tokens would rise in value through the efforts of the book club token manager and not through the change of price, outside of the control of the book club token manager, of the underlying books, then yes, people buying the tokens deserve to understand on what principle the book club token manager's efforts will increase the value of the tokens, what risks there are associated with the manager's efforts and the promised secondary market, etc. and therefore the token is now a security.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#153Earlier quoted context omitted.
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…
> Basically, almost all ICOs so far are illegal. They are only illegal in the US if they allow US citizens to participate, and the majority ban US citizens. So I think you have it backward.
Here’s a question. I’m a permanent resident (green card holder) who lives in the USA. Is it legal for me to invest in ICOs?
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#154Earlier quoted context omitted.
If they’re “pre-mined” then surely there is already a preset limited amount of tokens?
There are, but many of the ICOs are controlled by a company that reserve the right to change the contract at any time.
Can you point to a specific ICO where the token contract allows for additional token issuance? The ERC20 reference code does not include functionality for this, nor for replacing the token code at a later date.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#155> 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 develop…
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…
There is a second benefit.
Right now the crypto space is like the entry point of an MMORPG. Picture a bunch of dollars entering and then walking around and trying things. "What do I do here?" "How do I play?"
Obviously it's bubbly but that's not the point. The point is that all this new money entering the crypto space is looking for something to do.
Putting out an ICO will attract some of it. It is not accessible in any other way.
... and unfortunately ICOs and crypto have sucked a lot of the air out of conventional crowdfunding, equity crowdfunding, and small time angel investing. So crypto is where the money is and you have to go crypto to reach it.
It's dumb but markets are not rational.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#156Earlier quoted context omitted.
What's the 250k limit? (If you're speaking of Accredited Investors, the limit is $1m in net worth not including primary residence.)
Maybe they're referring to the 200k income threshold for the other accredited investor test?
Yes, that. Remembered wrong.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#157Earlier quoted context omitted.
This is the (literal) textbook definition of a security: any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undi…
Using the "Howey Test" even CryptoKitties should be regulated by the SEC!
The IRS considers them securities for capital gains. I'd be surprised if the SEC saw it differently.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#158Earlier quoted context omitted.
Legally speaking, are they on the hook if they merely say that and don't take preventative measures against US citizens? It could come back to haunt them if they ever want to expand to the US down the road and didn't take precautions.
A simple dropdown saying "citizenship" and then turning red with an error message saying "United States is not allowed. Did you mean United Kingdom instead?" will encourage most people to put something else. Then the company can fairly legitimately say "The customer lied to us about their citizenship. We took all reasonable measures to determine their citizenship, because there isn't a freely available database of wh…
My understanding is that the SEC expects you to require proof of an alternate citizenship via a passport. Simply having a drop-down that users can lie about by clicking a box or using a VPN is not good enough.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#159Earlier quoted context omitted.
Filecoin's ICO seems to be one of the few exceptions to follow securities law. https://www.cryptocoinsnews.com/filecoin-ico-raises-record-2...
> Filecoin's ICO seems to be one of the few exceptions to follow securities law. The SEC commissioner said that no ICO has registered as a security so far. Given that Filecoin was one of the only ICOs to openly advertise themselves as being a security, it seems like they could be in even more legal trouble than everyone else.
They filed a Reg D exemption, which is different from a registration, but allows you to legally offer securities if you comply with a narrow set of restrictions.
Re: Statement on Cryptocurrencies and Initial Coin Offerings
#160A little emphasis, focusing on the aftermath from the SEC's July report on the DAO: > "Following the issuance of the 21(a) Report, certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities. Many of these assertions appear to elevate form over substance. Merely calling a token a…
I think people are viewing this as an attack on crypto, when its actually just common sense. People put too much faith the 'Contract' half of 'Ethereum/Smart Contract' Basically. Today ICOs are selling tokens as shares of equity in their company, or similar. Which you can then sell on. The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestical…
> I think people are viewing this as an attack on crypto, when its actually just common sense.
> […] The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders.
> Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them.
This. IRS regards coins and tokens as capital gains taxable things regardless of whether they qualify as securities. SEC exists to protect investors from scams and unfair dealing. In order to protect investors, SEC regulates issuance of securities.