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Statement on Cryptocurrencies and Initial Coin Offerings

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Re: Statement on Cryptocurrencies and Initial Coin Offerings

#21

Post by lojack »

Frogolocalypse wrote: post #12
iMuzz wrote: post #4

> 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 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 y…

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.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#22

Post by dahdum »

couchdive wrote: post #20
everdev wrote: post #15

Earlier quoted context omitted.

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.

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.

It's just the income or $1M net worth excluding primary residence. The $5M is for business entities.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#23

Post by wbl »

lojack wrote: post #21
Frogolocalypse wrote: post #12

Earlier quoted context omitted.

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 y…

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 r…

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.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#24

Post by stale2002 »

lojack wrote: post #21
Frogolocalypse wrote: post #12

Earlier quoted context omitted.

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 y…

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 r…

Well, it is not about pre-mining specifically that makes it a security.

You could, for example clone Bitcoin exactly, but make a change where you recieve a billion free coins. It would be dumb, but that wouldn't be a security.

The problem is when ICOs premine and sell you a token for something that doesn't already exist yet. The token represents a future promise, as opposed to something that exist right NOW.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#26

Post by [deleted] »

jashkenas wrote: post #2

A 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…

[deleted]

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#27

Post by wmf »

iMuzz wrote: post #4

> 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…

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.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#28

Post by dahdum »

brianpgordon wrote: post #17
jashkenas wrote: post #2

A 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…

He even flat out says that most of the ICOs he's seen should be considered securities: > 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. Generally speaking, these laws provide that investors deserve to know wh…

They've been pretty clear in the past about the Howey test and ICOs running foul of it, so that part of his letter wasn't all that new. They're already taking action and should be - just today I saw an ad promising 60x returns on an internal market.

I didn't expect to see him acknowledging the positives of cryptocurrency and the ICO funding model overall.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#29

Post by ojr »

wbl wrote: post #23
lojack wrote: post #21

Earlier quoted context omitted.

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 r…

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.

the founder of bitcoin gave himself/herself a mining headstart with low difficulty, this can be seen as a founder reward

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#30

Post by modeless »

iMuzz wrote: post #4

> 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 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.

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