Our path to listing SEC-regulated crypto securities
blog.coinbase.com
blog.coinbase.com
> ...
> This is all being enabled by our acquisition of Keystone Capital Corp., Venovate Marketplace, Inc., and Digital Wealth LLC.
If I’m understanding this correctly it’s very impressive. They were able to acquire existing companies with those licenses and convince the SEC to let them retain and expand them to cover the entire business. It’s like the reverse acquisitions of small banks to enable a new player into the tightly regulated bank market (which is an incredible pain to get new approval for), but now applying it to crypto.
Slight off-topic looking at your profile, it says "Trade private equity stakes in technology companies". Curious how does that work?
https://www.startengine.com/tzero?no_newsletter=1
> The tZERO token will pay 10% of adjusted gross revenue to token holders on a quarterly basis, subject to board approval and the conditions outlined in the offering memorandum
I want to compete with Angels and VC's for investment in early stage companies. Where can I do that? I don't want to invest in a fund and AngelList isn't "democratizing" shit.
Great sentence in the press release. My thought was that someone (obviously would be Coinbase given their massive amounts of funding) was out looking for a BD. But they went a step further with the ATS and RIA licenses.
Coinbase is, in some sense, "backdooring" their way to becoming regulatory compliant in the US. That's fine - its a way of jump starting the process.
What it ultimately means is: 1. more legitimacy for crypto as they are now regulated by the FINRA and the govt (SEC) 2. If Crypto continues it slow rise - every BD and ATS will get into the game. So expect some realignment in this space.
Being a BD means a whole ton of paperwork, compliance and regulation. You have to abide by KYC and AML rules (Know Your Client and Anti-Money Laundering). People in charge of accounts need to become registered reps and take 1 of the Series Exams administered by FINRA. I imagine there will be some changes to incorporate crypto into the licensing.
File for arbitration. You’ll win or they’ll settle.
I couldnt get my BTC during the last bull run. But I was lucky since by the time I got my account the price went from 7k to 19k.
Sold all my BCH at 3.5k/coin, and sold a half of a bitcoin at 14k.
Yeah I ended up having to pay 50 dollars in credit card interest, but I was going to be selling my BTC at 7k/coin and that was before they released BCH.
Like what?
>with a whole new way of funding them.
What's wrong with US Dollars?
What company people are going to build is anyone's guess, but mine is that there's going to be a lot of them. Silicon Valley is only but a small dot on the face of the Earth. A lof of potential is going to be unlocked.
Honestly, I can see an "regulated"[0] crypto securites derivative market being deeper than the underlying crypto securites themselves since they'll trade more OTC.
[0] To the same degree that any government can regulate trade of their currency/debt on global markets.
But essentially, the paper the shares are printed on doesn't provide any legal guarantees by itself either. The fact that ownership is tokenized doesn't prevent companies from issuing guarantees to token holders.
See my comment on the comment next to yours for more:
On top of that, smart contract mediated investments can have much more additional guarantees. Projects like Aragon are creating DAO governance UIs that are on-chain, usable (from a UX perspective) and transparent for token holders. They allow holders to vote on transfers of funds, or monthly capital allocation, with the possibility to withdraw funds if they deem the operation of companies irresponsible. This a programmable financial infrastructure: the tools are there to build whatever you can come up with in terms of governance.
Besides DAO governance platforms, what will compel executives, for the cases where this applies, is the same thing that compels them right now: financial incentives, and the threat of prosecution. Are the guarantees comparable to those you get from a CEO on a NYSE traded company? Not by a long shot, this is the wild west right now.
But in keeping with the "Internet of Money" metaphor from my other comment, lack of controls and accountability didn't prevent Wikipedia from displacing the Encyclopedia Britannica.
I looked at your comment history and it seems you are assuming that people with a so called "pro blockchain" angle are all missing the point. I assure you not everyone in the space is an idiot, and you might be missing some points yourself.
Perhaps, but the SEC is pretty centralized, when two people can't come to an agreement then securities law enforced by the legal system determines the outcome of the dispute not smart-contract rules enforced by blockchain consensus.
> * I assure you not everyone in the space is an idiot, and you might be missing some points yourself.*
I don't think they're idiots, I think they're financially and emotionally invested in a fascinating technology that's not very useful. I don't think anything is wrong with that, and maybe one day I'll be proven wrong, but I have worked in this space (backend engineer for an exchange) and continue to follow it closely but skeptically and with good reason if you're intellectually honest about the track record of this industry.
> What's wrong with US Dollars?
It's not a good store of value over the long haul:
https://visual.ly/community/infographic/economy/purchasing-p...
Well sure, but no one is storing their wealth in USD. You use it to purchase assets. What store of value can you purchase with BTC without first converting to USD?
>”Binance made more money than Deutsche Bank last year. They funded growth with an ICO.”
Concentrated more wealth, you mean. What, exactly, did they contribute to the economy? At the very least, banks provide liquidity. The furthest I can gather of any crypto company mission is “make money”.
Is this actually solving a real problem that someone has?
One of the reason VC has its characteristic geographical distribution is because exit opportunities are extremely localized. No more.
This in turn unlocks a ton of talent-capital synergy opportunities for a myriad of projects outside of the large tech hubs.
You could do the same thing with normal investments, if trading houses and banks didn't do any KYC checks.
No regulation exists now in conventional banking that prevents me from doing that investment without crypto. It's just not practical and therefore unviable. I would need to surf through 3 different bureaucracies in 3 different languages and currencies. If you are doing this kind of thing, it's in your best interest to always do KYC, mostly not for AML - just for general due diligence purposes.
The fundamental thing is disintermediation, not deregulation. Regulation might be able to kill the space, but it would really be a triumph of the incumbents over a real progress opportunity.
PS I'm going at it from the investor angle here but it goes without saying that enabling investment enables entrepreneurship.
And why will this never hold for similar transactions done on the blockchain?
Blockchain is expensive and slow. Centralize it and be a business that provides a good customer experience.
Do you think they will actually represent shares?
As far as I can tell, all current ICOs have not represented any ownership or share of anything, other than the token itself.
On the other end of the discreetness spectrum, The DAO was a security ICO and it was the largest crowdsourced project in history at the time.
https://techcrunch.com/2018/04/13/exit-scammers-run-off-with...
https://techcrunch.com/2018/04/18/another-day-another-50-mil...
https://cointelegraph.com/news/unpacking-the-5-biggest-crypt...
Do you need more?
Where you got the idea that I'm denying the existence of ICO scams, I'll never know.
> What store of value can you purchase with BTC without first converting to USD?
Switching out to gold from BTC is pretty painless.
People just hope that someone else will use it as a sure if value, so that the price rises and they get rich off it. Ie, speculation.
Many people who started using Bitcoin last year lost a lot of their value.
My grandma did. 10,000 dollars when I was born into a bank account for college.
I think it was worth ~11k 27 years later since I ended up paying for college with work.
Ended up spending it on my house. If that 10k was invested... whew...
"Deutsche Bank reports pre-tax profit of 1.3 billion euros and net loss of 0.5 billion euros for 2017"
Its controlled by the Federal Reserve which is partly controlled by the government.
Basically your USD is worth what the central bank says they are worth. A new war? Your dollar loses value. Out of control debt? Print more money.
Bitcoin has 21,000,000 solutions ever ever ever.
If WWIII breaks out, I’m betting the Internet (in its current open and international form) will be an early casualty. How’s that going to work out for bitcoin exactly?
The only reason consumer goods are the same cost is because the exponential increase in technology and productivity.
Tomorrow there will be more USD than yesterday. This isnt true for BTC.
I think it would be very beneficial for everyone(especially HN crowd) to learn this.
Your sentence isnt important.
In the same token, I can easily say that the only reason you are in favor of these things is because you've forgotten the last couple hundred years of economic history.
I think a lot of the scare about securities is going to go away and a market will evolve with proper jurisdictions that are friendly to this.
Keep in mind that most so-called utility tokens today fail the Howey test and 10 get issued every minute. Yet no one will list a self-proclaimed security token. The big difference, I think, is that the perception of wrongdoing is very different, even if the wrongdoing itself is very similar.
I think when SEC declares Ethereum as security by end of this year, it will be the end of ICO.
I find your last statement extremely unlikely. I think Ethereum has a pretty solid utility story (and I'm definitely not putting Ethereum in the "bullshit utility" bucket). Making Ether a security would severely handicap the US as a jurisdiction for what could eventually be a huge new industry. If you look at the statements from the SEC and CFTC chairs in congress this is stated pretty openly.
I think a useful metaphor is to think of cryptocurrencies as the "Internet of money". Handicapping the Internet might have been possible before the Internet, but these days, people will find a way to operate businesses in new jurisdictions that are more friendly (because they will use the Internet to figure it out together). And crypto money might go to these jurisdictions just as fast, since it's not hampered by banking regulations.
With that being said, it's hard to figure out the outcomes of such a complex landscape with so many forces at play. But there's my alternate view for you to consider.
You can create any crypto currency but if nobody can buy it with cash or sell it for cash, it's worthless.
SEC has already announced they are looking at Ethereum as security, insiders have already sold according to rumours, because they are being targeted by the SEC-
Turns out if you sell tokens with expectation of investment returns, you've entered the danger zone unwittingly.
According to my sources, the SEC has Vitalik in crosshairs. He's fucked...but he doesn't know it yet
Got a cite?
Technically you could buy coffee with a fractional share of a goat or similar. Once a critical mass of securities are tokenized, we enter essentially the “Infinite Currencies” phase of money where there’s no difference between assets and currencies in terms of ease of spending.
I don't know if it's legal according to the SEC. I would love some clarity.
They aren't going to go after retail investors.
I work in the securities business. We once had someone send in a suspected altered document. Their state AG was notified, the U.S. Treasury and Homeland Security were notified, the SEC and FINRA were notified, and then we got some questions from Interpol, in Europe, and the UK's financial crimes investigator (through federal law enforcement). Fraudulently opening a securities account rings red-hot alarm bells because the automatic suspicion is nobody would be that brazenly stupid unless their expected pay-off was huge, i.e. terrorism or large-scale money laundering.
I dont expect them to regardless what the US government says.
Plenty of countries would need to all-align and send cops to stop nerds from programming.
The tokens would be tainted, unspendable, and worthless.
A wild guess at the potential reward for unmasking the hacker? ($950B * 0.3 * 0.001 --> ~300 M USD).
After the first such hack, companies might add a clause to the bylaws enabling the company to re-issue stock to the aggrieved party, restoring balance to the universe.
No they wouldn't because the whole "decentralized system" makes it so you have to get EVERYONE to agree to blacklist those tokens BEFORE THEY ARE TRADED or else it fails because the hacker can tumble those tokens across dozens of different cryptocurrencies on every exchange across thousands of accounts. You will never be able to hard fork every cryptocurrency for 1 mistake.
The only hack that I have ever heard of that was successfully reversed was the DOA and that was because they had 30 days to work out a hard fork on 1 wallet!
Cryptocurrencies are good for one thing only and that is blackhats.
Public ledgers are public. If the US IRS, perhaps coordinated with Interpol, publishes a blacklist of coins, those coins are toast.
At the very least, the blockchain provides a degree of global immutability that was previously impossible.
I myself have experienced something similar when a bank teller provided me with a routing number from a chase bank in a different state then I originally set up my account. Thus, my entire direct deposit pay for a month of $6,000 went to an account set for a chase routing number in a different state. Fortunately, I went to the bank soon after and they fixed it by putting the money in my proper account.
If they had used a cryptocurrency, I would have lost an entire months pay.
[1] https://www.cnbc.com/2017/07/17/coindash-website-hacked-7-mi...
[2] http://fortune.com/2018/01/22/ico-2018-coin-bitcoin-hack/
Is your plan to screw over all the original traders who exchanged tokens with the original blackhat?
https://en.wikipedia.org/wiki/Possession_of_stolen_goods
At the very least, those who inadvertently purchase stolen property tend to have to return it to the victim of the original crime.
https://nccriminallaw.sog.unc.edu/must-a-pawn-shop-return-st...
TL;DR: Yes. That is how the existing legal system works. If you think something might be stolen, don't buy it.
It is like Uber where you can explain the funding in terms of legal expenses because technically everything else is relatively simple.
But they refused to actually say if any specific coin was/wasn't a security besides bitcoin.