Do you guys agree?
This should be great as long as I can participate as a US citizen in ICO’s that are solving problems.
Actually I’m somewhat confused by this announcement and I read it a few times, read their site a few times.
Are they saying you can trade tokens that are classified as securities on this platform? With that said. which tokens are currently classified as security? DAO?
It also seems unclear if the token has to be 1) a security and 2) registered for trading or if it inherently means that all tokens who are classified as security will be able to trade here.
I think this gives tokens which ended up being classified as security a last resort place to trade. But I don’t see how it really is going to change things very much unless they can trade non-security tokens as well.
However , this does kinda point toward the some kind of relaxation from the SEC (hopefully)
Rigario, I agree that there are some unanswered questions. Let me explain my feelings that led to this post. First of all I need to mention that my memory is horrible and I like to read. Most decisions I make are based off of my gut and asking what others think to help me analyze my gut feeling. I am still reading my first economics book so I in no sense am any kind of financial expert and so my opinions below may not be true in terms of how things work. If there are experts (lawyers, economists etc in this forum, I hope they correct me if necessary) Also, due to my memory I don’t speak in technical terms, I usually speak in layman terms. So here it goes…
If you have ever lived in a big city, you may have been approached in the parking lot or on the bus by a stranger saying “Dvds, Cds, Dvds, Cds, I’ve got your favorites…” Now you may be interested in buying a movie and you dont want to miss out on a good deal, but do you trust this guy? On the surface its seems great that you happened to meet this guy with minimal effort on your part and get offered this great buying opportunity. Will the movie you buy be the quality you expect? Will you get in trouble in the future with this unorthadox purchase? You inquire further and you find out this stranger is selling homemade copies of movies that are currently in the theater. You are pretty sure this is illegal, and since you are a law abiding citizen, you let him know you are not interested. When you get home you turn on your TV and watch the latest movie on Netflix.
As an individual if I do something illegal regarding money, I stand to be fined, lose any money I have and/or go to jail. If I am a corporation or institution found to do something wrong in regards to money, and assuming the corp/institution is not given a “slap on the wrist” nominal fine or bailed out by the government usually the corp/institution dies. That is a huge risk for unsurety. The opportunity offered by the guy in the parking lot doesn’t look so great.
A regulated approved market is great news for the following reasons:
Legal trust. Entities with large amounts of liquidity can now with confidence participate in the crypto market knowing that that regulatory risk is reduced. I believe there are many corps/institutions/traditional big money individuals that have fomo and a lot of cash to spend who are waiting for this type of space.
Familiarity and ease of knowledge/infrastrucure burden. The products offered in this market act no different than say securities on the stock market. Now crypto becomes no different than stocks so this adds a new familiarity for these new investors. This means they know how to pay taxes on this product, they don’t have to hire additional staff to get into this space, they can use their existing brokers, lawyers and financiers. Also they may jump into the space based off of stockbroker/financial advisors recommendations because after all it’s just like the stock market, right? This opportunity is presented by people they trust. As big financial returns occur with some of these ico’s, word of mouth spreads, money attracts more money and then the US is so heavily invested in crypto that the current tetter totter between what the market wants and what the government wants tips further on the side of the capitalists, aka the market.
It’s big news for the US that the government is still in a round about way supporting capitalist markets. The IRS wins with all of the taxes it stands to collect from entities that always pay their taxes.
Anyway, these are my thoughts on why I think this news has the potential to be huge for future demand in the crypto space. I guess time and future prices will let us know if this is the case.
If people think that Bitcoin is expensive now just imagine what will happen to price/supply of Bitcoin when big money starts entering into this space price will shoot through the roof. Crypto market cap is so small compared to traditional market cap.
People like Jamie Dimon don’t want you to have your share of Bitcoin until they have theirs so that they can sell it to you and if eventuality it is allowed to be bought with all the money locked up in your IRA or 401K Bitcoin at $10,000 will look cheap. People will start talking about owning 10,000 Satoshi instead of full Bitcoin.
Agreed, Jamie is a capitalist of capitalists. Do you notice how those bitcoin naysayers never mention their thoughts on other cryptos? If he truly doesnt own Bitcoin I bet he has tons of crypto like xrp.
I agree that it’s a positive development. I also think it’s going to be a huge business for Patrick Byrne and his partners. I would really like to see the platforms take a larger role in the regulation of ICOs to get ahead of the centralized legal system and establish trust among the crypto community.
Actually I do agree with your train of thought that regulation and legitimacy will pave the way to mass acceptance. But the distinction that I’m drawing here is that this announcement is not the one that we are waiting for. Reading the article, their official site and their statements several times over, it seems like tzero is basically a platform to trade tokens if and only if they are considered securities. It doesn’t seem like they have a broad approval to trade tokens.
If I understand this correctly, basically you won’t be finding anything labeled a virtual currency there, but only those labeled as securities.
The fact is that many ICOs go out of their way to not be labeled as security so that they can avoid the SEC. In that sense, this exchange is basically an exchange of last resort.
Without the ability to list high quality ICOs (which tend to avoid being branded securities) and the main currencies, the exchange is not going to be that interesting. However, like I said, hopefully this means they are moving in the direction and that one day the SEC will allow an actual regulated exchange to list all ICOs with its support. Right now, TZero is basically an exchange which sells only penny stock and pink sheets. In your analogy, its like a DVD store that can only sell movies that didn’t make the hollywood cut. Which is still exciting if you were a DVD enthusiast, but not as exciting as knowing you can go there and buy all movies.
Rigario, thank you for this opportunity to take our discussion further.
I am going to reread everything and get back to you with a response worthy of the discussion we are having to the points you raise. I need a couple days though as unfortunately with my day job I don’t have enough time to strategically think things through. Also as I rethink my views I may ask you to clarify yours via additional questions before I finish my response.
This will likely bring more credibility to cryptos which is good. I think loose regulation is a good idea that is motivated purely to protect an average citizen. The sad truth is that I think the SEC and the FCA here in the UK take the regulations to far. Yes I would like to be protected from outright scams but I want the right to invest in what I judge to be a good, it’s my money after all. Many of the best investments with big returns, that the public don’t have access to require “accredited investor” status which is very hard to get. Yes these investments may be more risky but as long as you only invest money you can afford to loose and these risks are made clear then it should be my decision wether to invest or not. I suspect the true motive of over regulation is to help the rich get richer, though it is sold under the guise of consumer protection. I see measly returns in a bank as a much bigger long term risk to my wealth than a couple of bad investments that I can learn from.
If alternative investments were to be opened up to the public then the increased demand for these investments would reduce the returns for the few but rest of us would be able to get a better ROI than we are used to. As it stands crypto is the exception to this rule but this article could be describing the first move to only allow “accredited investors” into the ICO space.
Please excuse my late contribution to this discussion. I’ve only recently joined the Pub and have just started getting the hang of things here.
The earlier comment about this new exchange being for coins that meet the definition of securities is spot on. So, to the extent that an organized exchange for those coins gets established, it means broader acceptance of those coins.
The real issue here is the hoops involved with registering with the SEC as a security. I’m new to this cryptocurrency world, but have some experience with SEC registration. Complying with those rules will cripple the ICO market overnight. This is why the rules for accredited investors and qualified purchasers were put in place. These allow an enterprise to raise capital without jumping through the hoops.
Now, I may be wrong on this and maybe new ICOs are registering with the SEC as securities already, but if so they are doing a great job of not advertising that fact.
The basic problem I see is that most coins are securities, at least according to SEC rules. So this means that it is only a matter of time before the SEC starts serving notice on any ICO that meets the rule that they can’t sell in the USA without registering. Regulatory agencies in other countries will quickly follow this lead.
This means it was fun while it lasted.
@MarkKos, welcome and conversations are never late here . Its interesting that you mention complying with the rules will cripple icos. I have a lot of articles saved to my trello board to be read to deepen my understanding of crypto legality in order to understand @Rigario position. I came across a couple articles mentioning that the US IPO market may be in decline due to issues involved with regulation and filing. Also there seems to be global pressures as well contributing to this decline. For those interested a few articles are here.
On a side note, the statement that I hear when regulation is mentioned “accredited investors and qualified purchasers“ leaves a sour taste in my mouth every time. The crypto market is for the people, even small financial nobodies like me. Putting regulation on crypto that only benefits a small group of people is wrong. I just got the sudden urge to go buy some bitcoin, of which I am going to go and do right now. Thanks coinbase!
Thank you for your kind comments.
My appreciation for SEC regulations comes out of the fact that they were developed in the 1930s following the Great Depression. Prior to that hucksters and swindlers were selling stocks that were completely worthless. The rules were put in place to protect people.
Exemptions were put in for people who were considered smart enough or had enough advisers that they did not need protection. These are the aforementioned accredited investors and qualified purchasers. Here’s a reasonable definition of that group: https://www.compliancebuilding.com/2010/04/21/qualified-purchasers-under-the-investment-company-act/
The problem is that technology has surpassed the rules. Crowd sales have supplanted IPOs and even private equity. The SEC is behind the curve on this development but will catch up and start enforcing the existing securities laws. The only reason they have not already is that they are a bureaucracy and slow at just about everything.
The best case scenario is if the SEC carves out another exemption for cryptocurrencies (and can we PLEASE come up with a better name for them?) based on the total amount raised or the amount any one buyer can put in, either as a percentage of the total or a hard dollar amount.
If the SEC does not do this, coins will no longer be able to raise capital for new business ideas without registering with the SEC. Now, there may be a business opportunity in this. If someone with a law degree wants to create a ‘fill in the blank’ registration template, coins may register. It’s more likely that the market will shut down. Hence, my “fun while it lasted” comment.
The crypto world will pivot away from raising capital for new business ideas and start to fund charitable ideas. Perhaps some smart people will develop a way to meld these two concepts, so that the ICO gets the new charity up and running but somehow the operation of the charity generates funds. I’m not sure how that happens, but directors of large charities make big bucks running those organizations. Seems like they have figured something out.
Everyone interested in this in the USA gets on the phone to their Senator and tells them that the SEC needs to carve out a new securities exemptions for ICOs.
Great article. And here are some of the latest US BTC regulations.