Cryptocurrencies

[rkbabang]

1 hour ago, Castanza said:

 

And if you work at the SEC who’s going to prosecute you? Place your bets, then make it happen. Nice work if you can get it.

[TwoCitiesCapital]

18 hours ago, Castanza said:

 

 

Well, unless if they sold them, they're quickly heading to $0. 

 

Probably still sitting on multiples of the initial investment, but unless it they let go at peak panic yesterday when it was down to $47-48, the stock has really only been moving up since then. 

 

This options are now only ~0.50 from a few bucks. 

 

Glad I added to COIN yesterday at $48ish. This was pretty well telegraphed. Even when COIN sued the SEC a few weeks back, it was widely seen as a pre-emptive move to front run an SEC lawsuit against them. Why the market knew that a lawsuit was coming and still reacted this way when announced is beyond me. 

[changegonnacome]

3 hours ago, TwoCitiesCapital said:

COIN yesterday at $48ish

 

Whats the bull case for COIN from here - outside of BTC trading.........effectively every other token on the platform/exchange has been deemed to be a security..didn't COIN business shrink by orders of magnitude?...assuming COIN gets even a broker-dealer license......what percentage of these tokens/projects economics would sustain a US/EU securities registration and public company disclosure requirements....never mind the exec management teams or leadership teams signing sarbanes oxley etc. My guess is not many and 95% will just choose to trade offshore in El Salvador with convoluted backdoors into the USA.

 

So whats left - BTC broker/custodian.......isnt that commoditized now......fees are compressing and the SEC just shut down your adjacent market opportunities to trade other exciting tokens.

[TwoCitiesCapital]

16 hours ago, changegonnacome said:

 

Whats the bull case for COIN from here - outside of BTC trading.........effectively every other token on the platform/exchange has been deemed to be a security..didn't COIN business shrink by orders of magnitude?...assuming COIN gets even a broker-dealer license......what percentage of these tokens/projects economics would sustain a US/EU securities registration and public company disclosure requirements....never mind the exec management teams or leadership teams signing sarbanes oxley etc. My guess is not many and 95% will just choose to trade offshore in El Salvador with convoluted backdoors into the USA.

 

So whats left - BTC broker/custodian.......isnt that commoditized now......fees are compressing and the SEC just shut down your adjacent market opportunities to trade other exciting tokens.

 

Other than BTC and ETH* 

 

Of which I assume collectively dominate the bulk of trading activity (though not certain). 

 

I generally disagree with the SEC here to the extent that the ownership of these tokens doesn't entitle you to ANYTHING. 

 

You have to do something with them to earn a return- staking, participate in governance, provide liquidity, etc. But the ownership of the token itself bestows NOTHING. 

 

From that perspective, I agree with Coinbase. We need new regulation and guidance on how to handle these distributed/decentralized business models and revenue generation that more closely resembles self employment/contract work than it does the ownership of a security. 

[rkbabang]

27 minutes ago, TwoCitiesCapital said:

 

Other than BTC and ETH* 

 

Of which I assume collectively dominate the bulk of trading activity (though not certain). 

 

I generally disagree with the SEC here to the extent that the ownership of these tokens doesn't entitle you to ANYTHING. 

 

You have to do something with them to earn a return- staking, participate in governance, provide liquidity, etc. But the ownership of the token itself bestows NOTHING. 

 

From that perspective, I agree with Coinbase. We need new regulation and guidance on how to handle these distributed/decentralized business models and revenue generation that more closely resembles self employment/contract work than it does the ownership of a security. 

 

 

Exactly.  When you own one of these tokens the only thing you own is the token itself.  Which makes it closer to a commodity rather than a security.

[TwoCitiesCapital]

7 minutes ago, rkbabang said:

 

 

Exactly.  When you own one of these tokens the only thing you own is the token itself.  Which makes it closer to a commodity rather than a security.

 

+1 

 

It's been an slightly expensive education for me into this field as a staker in some tokens that haven't done well since 2021

 

But it's absolutely made it clear to me that this space is different from ownership and governance structures that exist today. 

 

The SEC is just flat out ignorant when it comes to these products and it's shocking to me as someone who thought Gensler was supposed to have been a crypto advocate and professor when he joined. 

[changegonnacome]

Im tourist in this space so dont want to suggest I have strong convictions on what I'm about to say - however - every token I ever looked at that seemed vaguely interesting.........clearly had a profit expectation.......and then when you looked into the 'project' itself....all the promotion of the project was very much centered around who the bunch of individuals were who had (a) started/founded the project & (b) the on-going success of the 'project' very much depended on their endeavours cause they were geniuses or had done X,Y,Z before etc..

 

The classic project pitch was the folks involved in this new endeavour were founding members of Etherium etc. and/or were very close friends of Vitalik Buterin etc. and that this was Ethereum except it would scale better. Literally every 'pitch' I ever saw....had these two elements in it.

 

Profit participation through the endeavours of others......sounds very much like a security to me.....albeit with various somewhat distracting ambiguity which felt like a purposeful distraction to make the token not seem like a security.......usually that the token itself was also both the reward mechanism while simuntasouly being the voucher required to make the service work i.e. 'gas'.......... the supposed project was being run by a DAO etc......yet the decentralized org.....had a press department that constantly and consistently pumped out press releases........and all the attention around the project was centered cult like on 3 to 4 individuals in the project....which looked pretty much like an exec management/leadership/founders team to me.

 

Walks like a duck, quacks like a duck.

 

Edited June 8, 2023 by changegonnacome

[rkbabang]

4 minutes ago, TwoCitiesCapital said:

 

+1 

 

It's been an slightly expensive education for me into this field as a staker in some tokens that haven't done well since 2021

 

But it's absolutely made it clear to me that this space is different from ownership and governance structures that exist today. 

 

The SEC is just flat out ignorant when it comes to these products and it's shocking to me as someone who thought Gensler was supposed to have been a crypto advocate and professor when he joined. 

 

Yeah. 

 

"We already have digital currency. It's called the U.S. dollar. It's called the euro or it's called the yen; they're all digital right now” -- Gary Gensler

 

Not a huge crypto advocate.  

 

Yes, the US is clearly not acting rationally here going completely against the advice of Major Jason Paul Lowery in his thesis I recommended above "Softwar".   Unless the intention is to get Americans to abandon shitcoins and focus on Bitcoin alone, then maybe they are doing this because they are taking his theory seriously.  I don't know.

[TwoCitiesCapital]

17 minutes ago, changegonnacome said:

Im tourist in this space so dont want to suggest I have strong convictions on what I'm about to say - however - every token I ever looked at that seemed vaguely interesting.........clearly had a profit expectation.......and then when you looked into the 'project' itself....all the promotion of the project was very much centered around who the bunch of individuals were who had (a) started/founded the project & (b) the on-going success of the 'project' very much depended on their endeavours cause they were geniuses or had done X,Y,Z before etc..

 

The classic project pitch was the folks involved in this new endeavour were founding members of Etherium etc. and/or were very close friends of Vitalik Buterin etc. and that this was Ethereum except it would scale better. Literally every 'pitch' I ever saw....had these two elements in it.

 

Profit participation through the endeavours of others......sounds very much like a security to me.....albeit with various somewhat distracting ambiguity which felt like a purposeful distraction to make the token not seem like a security.......usually that the token itself was also both the reward mechanism while simuntasouly being the voucher required to make the service work i.e. 'gas'.......... the supposed project was being run by a DAO etc......yet the decentralized org.....had a press department that constantly and consistently pumped out press releases........and all the attention around the project was centered cult like on 3 to 4 individuals in the project....which looked pretty much like an exec management/leadership/founders team to me.

 

Walks like a duck, quacks like a duck.

 

 

You can complain about deceptive marketing tactics, but that doesn't make something a security. The profit potential of beanie babies, and the hopes of the masses who purchased them, didn't make them a security. 

 

Ownership of the token itself bestows NO ownership of the enterprise, or profits, or assets, or anything. You have to DO something with it. 

 

Perhaps the ownership of the token AND staking it is comparable to a security. But then it's the staking that needs to be regulated - not the token itself which bears none of those characteristics. 

 

And this is exactly what I, and Coinbase, are asking for. New regulation and clarity around DAOs, tokens, staking, liquidity providing, etc 

 

This is a new way of organizing labor/ownership/capital - not unlike the difference of C-corps, partnerships, REITS, etc which all have similarities and differences and different rules. We need different rules for tokens and not some blanket provision that pretends they're the same when they're clearly not. 

 

.

Edited June 8, 2023 by TwoCitiesCapital

[changegonnacome]

1 hour ago, TwoCitiesCapital said:

The profit potential of beanie babies, and the hopes of the masses who purchased them, didn't make them a security. 

 

I would suggest that certain, mass hysterias come along like beanie babies that become trading sardines with profit expectations.....the toy company that created beanie babies had no intent around them becoming a speculative vehicle with a profit expectation after they were purchased......their intent was to sell them, as many as they could...... in a transaction that started and stopped at the cash register.......it was a fluke, the profit expectation was created not by the sellers of beanie babies but by the minds of the buyers of beanie babies. Its subtle but hugely important difference here.

 

Diametrically opposed to the above every crypto token project on Day Zero begins with the principle that the tokens value will go up over time...that the token transaction doesn't start & end at the cash register......see they are creating a 'thing' with a profit expectation from its very moment of inception. THEN because these tokens & architecture, press & PR don't will themselves into existence autonomously (they aren't base commodities)......it means the tokens very creation & existence depends on the endeavors of others to create them.....it means they have founders & promoters. Sure sounds like a security to me.

 

The commodity argument barely holds weight - there is no entrepreneur/founder of true base commodities...... bronze, gold or wood......these things just EXIST.........the founder/entrepreneur who created commodities is GOD/the Universe (if you believe in that sort of thing  )........a token ALWAYS has a founder or a group of founders.....it is ALWAYS willed from non-existence into existence by the endeavors of other human beings......it ALWAYS has baked within in its DNA, its very creation a profit expectation.

 

There is a difference between beanie babies, commodities & this token stuff - and it boils down to intent at (1) the very moment before its creation i.e. a profit or no-profit expectation built into the DNA of the 'thing' being created & (2) because these things aren't base commodities, they don't EXIST..... they require a creator/founder/promoter to create them which satisfies the second leg of the SEC's argument the ' endeavors of others'. & (3) because the transaction doesn't start & stop at the cash register for the token it has an explicit or implicit contract baked within it....it sure starts to look like an investment contract.

Edited June 8, 2023 by changegonnacome

[TwoCitiesCapital]

1 hour ago, changegonnacome said:

Diametrically opposed to the above every crypto token project on Day Zero begins with the principle that the tokens value will go up over time

 

The commodity argument barely holds weight - there is no entrepreneur/founder of true base commodities...... bronze, gold or wood......these things just EXIST.........

 

 

 

Some tokens it's true of. Others it is not.

 

I'd argue the people who created Doge did so as a joke and to point out the ridiculousness of the coin craze of 2017/2018. Today? It's its own meme coin with a frenzied following. Definitely something created by the buyers and not the sellers. 

 

As far as trading commodities - there are plenty that are created governed by the same rules as base metals. Gasoline. Steel. Uranium. Freight tonnage. Etc. 

 

All require some level of processing/refinement/creation and yet are still governed by similar/same contracts and governance as base metals found freely in the ground. The "creation" argument is what doesn't seem to hold water here. 

[rkbabang]

1 hour ago, changegonnacome said:

 

I would suggest that certain, mass hysterias come along like beanie babies that become trading sardines with profit expectations.....the toy company that created beanie babies had no intent around them becoming a speculative vehicle with a profit expectation after they were purchased......their intent was to sell them, as many as they could...... in a transaction that started and stopped at the cash register.......it was a fluke, the profit expectation was created not by the sellers of beanie babies but by the minds of the buyers of beanie babies. Its subtle but hugely important difference here.

 

Diametrically opposed to the above every crypto token project on Day Zero begins with the principle that the tokens value will go up over time...that the token transaction doesn't start & end at the cash register......see they are creating a 'thing' with a profit expectation from its very moment of inception. THEN because these tokens & architecture, press & PR don't will themselves into existence autonomously (they aren't base commodities)......it means the tokens very creation & existence depends on the endeavors of others to create them.....it means they have founders & promoters. Sure sounds like a security to me.

 

The commodity argument barely holds weight - there is no entrepreneur/founder of true base commodities...... bronze, gold or wood......these things just EXIST.........the founder/entrepreneur who created commodities is GOD/the Universe (if you believe in that sort of thing  )........a token ALWAYS has a founder or a group of founders.....it is ALWAYS willed from non-existence into existence by the endeavors of other human beings......it ALWAYS has baked within in its DNA, its very creation a profit expectation.

 

There is a difference between beanie babies, commodities & this token stuff - and it boils down to intent at (1) the very moment before its creation i.e. a profit or no-profit expectation built into the DNA of the 'thing' being created & (2) because these things aren't base commodities, they don't EXIST..... they require a creator/founder/promoter to create them which satisfies the second leg of the SEC's argument the ' endeavors of others'. & (3) because the transaction doesn't start & stop at the cash register for the token it has an explicit or implicit contract baked within it....it sure starts to look like an investment contract.

What something actually is has nothing to do with the intentions of its creators.   Gunpowder was supposed to be a medicine, but no one thinks of it that way today.   I can manufacture shiny little metal beads and tell you that if you buy them they will bring you great wealth because people will pay you more for them someday, and I can do this with the intention of getting rich myself.  But that doesn't make these shiny little metal beads into a security.  If it isn't a contract which gives you the rights to ownership of something else then it is not a security regardless of what its creators intended.

[TwoCitiesCapital]

Don't get me wrong. I'm not endorsing these altcoins. I DO want regulation in the space. 

 

But they're different from existing products and regulatory guidance is needed to account for those differences. 

 

The SEC has decided to bury it's head in the sand and regulate via litigation as opposed to actually passing thoughtful regulation and letting the market sort the wheat from the chaff within that regulatory framework. 

 

I own Coinbase because I see them as being one of the few trusted intermediaries for buying/selling Bitcoin and Ethereum (amongst other alt coins) and an intermediary of a nascent NFT marketplace where I believe the potential for NFTs (for uses outside of cartoon monkeys) is huge. 

 

I also believe that most consumers will opt for an intermediary solution for buying/selling Bitcoin instead of developing the technical chops required to run a node, organize their own marketplace, and buy/sell to anonymous individuals over the web where the transfer being completed by both parties is uncertain. And I believe Coinbase will be one of the few direct beneficiaries of the consolidation of the space as many crypto intermediaries have gone bankrupt. 

 

At one point they were making ~$15/share. Even with fee compression, I expect they may be able to get back to that $15/share again in the intermediate term with a more diversified revenue base and that the prices I've been buying at sub-$60 will be a steal at that time. I didn't buy the IPO - I bought the crypto crash. 

 

 

Edited June 8, 2023 by TwoCitiesCapital

[changegonnacome]

5 minutes ago, rkbabang said:

I can manufacture shiny little metal beads and tell you that if you buy them they will bring you great wealth because people will pay you more for them someday, and I can do this with the intention of getting rich myself.  But that doesn't make these shiny little metal beads into a security. 

 

Really appreciate both your feedback here.....genuinely wrestling with the idea/concept.....but the devil & detail and line that needs to get crossed from just selling a thing to selling an investment contract is a subtle one & I think the SEC has got it about right.....just went through the Coinbase compliant where they run the Howey test rule over some of tokens in question and its hard to disagree with them when you visit the white papers that started these ICO's or ITO's.

 

To be clear I completely agree with you both that BTC & Doge are not securities.

 

In terms of your example @rkbabang isnt the point that the shiny metal beads......can come with promises vs. representations (which are very different) from the seller of the bead around what THEY are going to do post-bead sale to drive up the value of the bead soon to be in your possesion...... so explicit & implied project timelines & milestones and things that they the founders/creators are going to do after the initial sale...the usual stuff about how the promoters are going to increase adoption & the usefulness of the underlying such that metal bead becomes more valuable over time.

 

Put it like this - I've never seen a token sale......where the pitch is here's a token we've created to be sold at 0.000001cents on July 4th......and absolutely nothing is going to happen after you buy it! Zero, zilch, nada.

 

Doge which @TwoCitiesCapital mentioned is an example of this....I 100000% agree......its not a security....no promises to do anything post-creation/sale was implied by anyone.........quite the opposite.

 

Put another way using your example......if you sold me a metal bead.....and told me it would be worth more one day just because you taught so and that was it....and I bought it.......thats bad on me for believing it. Your a huckster or maybe you believe it too who knows. People who sold beanie babies to each other online were these people - no investment contract, no securities just morons. However, and this is the key point >>>>> you made no promises about what YOU personally would do post sale of said bead...to increase the value of the bead I'm about to buy from you. You told me your opinion/believe about the future value of the magic bead in your possession, sold me one & we parted ways. Your future endeavors have nothing to do with the value of the magic bead now in my ownership. So yeah I totally agree in this instance..... no investment contract was created either implied or explicit. It is the sale of a metal bead from a wise man to an idiot....or maybe just between two idiots.

 

However if you sold me a metal bead....but lets be clear in a token project you are being sold a unique type of metal bead not a commodity bead (last time I checked cardano doesnt work in solano slot machines type thing).............and in the sales process to get me to buy YOUR specific metal bead with rkbabang embroidered on it......you told me about your plans that these unique beads with your insignia on it (RKB token)..........will become a right of use token bead inside of software project your currently working on with other genius developers that did X,Y,Z and that if successful & adoption increased of your software project that the magic bead you are selling me today will go up in value because people will need it as gas and after we settle the transaction for the RKB metal bead heres what I'm going to do as soon as you give me your money - action items / timeline/roadmap/business opportunity/value proposition. So after all that ---- you say to me- would you like to buy my rkbabang magic bead now?.......that is fundamentally different transaction than the one above.......one is a sale of thing....opinions may have been shared about its future value but no promises were made.........the other is a creation of an investment contract......and what I just described above is contained in every single 'white paper' document I ever read for an ICO or ITO (except Doge!)

 

As I said above @rkbabang & @TwoCitiesCapital...........send me a token project white paper document (excluding BTC & Doge) that says within it we are launching this token and selling it for 0.0000001cents on July 4th........and absolutely nothing is planned by the authors of the white paper once the token is sold to you.......nothing is built which will go live or nothing is to be built, no portal/website or service will 'go live'...... .......nobody will use this token for anything. Its just a token caveat emptor!

 

That white paper doesn't exist - maybe it does & its just called Doge coin.  Cause the authors of white papers and creators of tokens, but lets just call them entrepreneurs & promoters, all make explicit promises in a token sale about what happens next, what will 'go live' and why people will care about it cause it does X,Y,Z faster/better/cheaper ultimately.

 

So maybe I revise my thoughts - what makes an investment contract is not intent to make money at creation.............its the promises & representations around future actions the seller of the token will do post-sale to enhance the value of the underlying thing that they just sold.........its this that changes the nature of the transaction..........its the commitment and representations that the seller will do X,Y,Z post-sale to increase the value of what they just sold you.....this how a 'thing'......gets turned into a security.

 

Somebody sells me a baseball card of Babe Ruth - we just transacted a thing........somebody sells me a baseball card with @TwoCitiesCapital on it but in doing so he promises post-sale that he will be establishing a secondary market in twocitiescapital baseball cards on a website & will then start marketing the card as unique & special to drive attention to these cards........and then after that he'll open up a casino in vegas where only twocitiescapital baseball cards will work in the slot machines and so all going well what I sell you today for 0.000001 will go up if he's succesful ........well done...... you just managed to turn a baseball card into a security & the SEC wants to talk to you about it!

[wachtwoord]

17 hours ago, changegonnacome said:

 

Really appreciate both your feedback here.....genuinely wrestling with the idea/concept.....but the devil & detail and line that needs to get crossed from just selling a thing to selling an investment contract is a subtle one & I think the SEC has got it about right.....just went through the Coinbase compliant where they run the Howey test rule over some of tokens in question and its hard to disagree with them when you visit the white papers that started these ICO's or ITO's.

 

To be clear I completely agree with you both that BTC & Doge are not securities.

 

In terms of your example @rkbabang isnt the point that the shiny metal beads......can come with promises vs. representations (which are very different) from the seller of the bead around what THEY are going to do post-bead sale to drive up the value of the bead soon to be in your possesion...... so explicit & implied project timelines & milestones and things that they the founders/creators are going to do after the initial sale...the usual stuff about how the promoters are going to increase adoption & the usefulness of the underlying such that metal bead becomes more valuable over time.

 

Put it like this - I've never seen a token sale......where the pitch is here's a token we've created to be sold at 0.000001cents on July 4th......and absolutely nothing is going to happen after you buy it! Zero, zilch, nada.

 

Doge which @TwoCitiesCapital mentioned is an example of this....I 100000% agree......its not a security....no promises to do anything post-creation/sale was implied by anyone.........quite the opposite.

 

Put another way using your example......if you sold me a metal bead.....and told me it would be worth more one day just because you taught so and that was it....and I bought it.......thats bad on me for believing it. Your a huckster or maybe you believe it too who knows. People who sold beanie babies to each other online were these people - no investment contract, no securities just morons. However, and this is the key point >>>>> you made no promises about what YOU personally would do post sale of said bead...to increase the value of the bead I'm about to buy from you. You told me your opinion/believe about the future value of the magic bead in your possession, sold me one & we parted ways. Your future endeavors have nothing to do with the value of the magic bead now in my ownership. So yeah I totally agree in this instance..... no investment contract was created either implied or explicit. It is the sale of a metal bead from a wise man to an idiot....or maybe just between two idiots.

 

However if you sold me a metal bead....but lets be clear in a token project you are being sold a unique type of metal bead not a commodity bead (last time I checked cardano doesnt work in solano slot machines type thing).............and in the sales process to get me to buy YOUR specific metal bead with rkbabang embroidered on it......you told me about your plans that these unique beads with your insignia on it (RKB token)..........will become a right of use token bead inside of software project your currently working on with other genius developers that did X,Y,Z and that if successful & adoption increased of your software project that the magic bead you are selling me today will go up in value because people will need it as gas and after we settle the transaction for the RKB metal bead heres what I'm going to do as soon as you give me your money - action items / timeline/roadmap/business opportunity/value proposition. So after all that ---- you say to me- would you like to buy my rkbabang magic bead now?.......that is fundamentally different transaction than the one above.......one is a sale of thing....opinions may have been shared about its future value but no promises were made.........the other is a creation of an investment contract......and what I just described above is contained in every single 'white paper' document I ever read for an ICO or ITO (except Doge!)

 

As I said above @rkbabang & @TwoCitiesCapital...........send me a token project white paper document (excluding BTC & Doge) that says within it we are launching this token and selling it for 0.0000001cents on July 4th........and absolutely nothing is planned by the authors of the white paper once the token is sold to you.......nothing is built which will go live or nothing is to be built, no portal/website or service will 'go live'...... .......nobody will use this token for anything. Its just a token caveat emptor!

 

That white paper doesn't exist - maybe it does & its just called Doge coin.  Cause the authors of white papers and creators of tokens, but lets just call them entrepreneurs & promoters, all make explicit promises in a token sale about what happens next, what will 'go live' and why people will care about it cause it does X,Y,Z faster/better/cheaper ultimately.

 

So maybe I revise my thoughts - what makes an investment contract is not intent to make money at creation.............its the promises & representations around future actions the seller of the token will do post-sale to enhance the value of the underlying thing that they just sold.........its this that changes the nature of the transaction..........its the commitment and representations that the seller will do X,Y,Z post-sale to increase the value of what they just sold you.....this how a 'thing'......gets turned into a security.

 

Somebody sells me a baseball card of Babe Ruth - we just transacted a thing........somebody sells me a baseball card with @TwoCitiesCapital on it but in doing so he promises post-sale that he will be establishing a secondary market in twocitiescapital baseball cards on a website & will then start marketing the card as unique & special to drive attention to these cards........and then after that he'll open up a casino in vegas where only twocitiescapital baseball cards will work in the slot machines and so all going well what I sell you today for 0.000001 will go up if he's succesful ........well done...... you just managed to turn a baseball card into a security & the SEC wants to talk to you about it!

 

+1

 

Btw there are other examples of non-securities but most of them were made long ago in the first wave of Bitcoin copy cats. LTC is still alive today as an example. In the same era eg XMR was released which also isn't a security.

 

Btw in my opinion ETH most definitely is a security. The pre-mine and pre-sale plus promises prior to pre-sale make that true. Politics is the only reason the SEC and EU are isolating ETH (too many people favor it and those involved with the project have done a lot of lobbying).

 

Edit:

 

I just wanted to add I agree with TwoCitiesCapital that regulation through litigation the SEC is pursuing now is terrible (but expected of them). They are simply defending and empowering themselves (define everything strict and see what you can get away with in court).

Edited June 9, 2023 by wachtwoord

[changegonnacome]

1 hour ago, wachtwoord said:

I just wanted to add I agree with TwoCitiesCapital that regulation through litigation the SEC is pursuing now is terrible (but expected of them). They are simply defending and empowering themselves (define everything strict and see what you can get away with in court).

 

Yes I agree with this too - I’m more familiar with the EU’s regime…which is just way more sensible approach than what SEC/CFTC have done in the US….which is to just say that all the rules on the books for this ‘new’ asset class already exist. The EU kind of knew all the rules were on the books for the asset class already……but they decided to bring clarity to the situation with the MICA wrapper…..and in doing so removed the ‘grey area’ /regulatory arbitrage game which is at the heart of many a crypto project.

 

The ‘Markets in Crypto Assets (MICA)’ regulatory regime in the EU was indeed put in place to finally put to the bed the idea of grey areas or confusion in the EU that many crypto promoters have used as a fig leave behind which they could carry out low cost/low overhead securities offerings etc……the trick in crypto before MICA and up until very recently in the US…….was to get a legal firm to write you a letter stating that what you were proposing to do in their opinion was either (1) not a securities offering under current law or (2) regulation was sufficiently unclear, undeveloped & activity so unique  such that the law firm could not apply the rules on the books with certainty to your proposed business plan……….or a mixture of both.

 

How do I know this - I’ve met a bunch of these folks through an acquaintance in the space…….in US terms then…….you effectively created an LLC shield through which this security would be offered…..you then collected these opinion letters from your lawyers & sent them $$$$ in exchange…..one letter for the company…..one letter for you personally as the CFO/CTO etc…….you put them both in your home safe under lock and key…….as a future legal defense.shield if/when things went south…..safe in the knowledge that there was literally thousands and thousands of securities/token just like yours being launched in 2020/2021 anyway so highly unlikely you got singled out for prosecution by SEC. That was/is the game…..Coinbase and the compliant if upheld in the courts kinda ruins that game. 

 

However back to MICA……..what the EU did with this legislation is they effectively put a crypto overlay around their existing MIFID/E-Money & payments institutions and AML legislation…the VASP registration is the only technically new “license” that got created…..and even that is really just a light touch AML regime lifted from existing E-money & Payments institutions licensing …the result of MICA is it classified and forced every crypto activity you can think off into an existing regulatory lane, that ultimately saw them fall into a bucket of existing financial services regulation already on the books in the EU. Done….the legit players stayed in the Europe & got license and all the phony/frauds decamped or re-focused on schemes in the US & Asia. Crypto scams in the EU, post-MICA, had their legal jeopardy increased 100 fold……and legit crypto firms saw their governance & compliance costs go through the roof such that many were rendered deeply unprofitable. I’m proud of the EU in this regard…..they didnt bury their head in the sand…..they did what bureaucrats do with some things they don’t really like or believe is legit….. they strangled it in red tape & costs. If TradFi can exist profitably in that regime….it must have an underlying business model that can sustain the compliance costs…….if crypto cant well perhaps the business model, like many others in emperors new clothes FinTech, was really just a game of regulatory arbitrage all along. 

Edited June 9, 2023 by changegonnacome

[TwoCitiesCapital]

21 hours ago, TwoCitiesCapital said:

The SEC has decided to bury it's head in the sand and regulate via litigation as opposed to actually passing thoughtful regulation and letting the market sort the wheat from the chaff within that regulatory framework. 

 

Further supporting this argument, is the case Coinbase has made. 

 

Who approved Coinbase's IPO in 2018? The SEC. 

 

Did the SEC not do their due diligence? Or did they not think Coinbase was offering the purchase/sale of unregistered securities and acting as an unlicensed broker/exchange at that time? 

 

If the SECs job is to protect investors, why would you allow this security to IPO and be sold to investors when you knew they were brazenly breaking the law? Why is the SEC going after Coinbase, which received tacit approval of its business model @ IPO, instead of the actual token issuers who are minting and profiting off the sale of unregistered "securities" and the action they're used for? 

 

The whole things is a regulatory farce. Either the SEC is simply incompetent at its job or this is all political and has absolutely nothing to do with the fundamentals of whether these are securities or not

Edited June 9, 2023 by TwoCitiesCapital

[rkbabang]

1 hour ago, TwoCitiesCapital said:

The whole things is a regulatory farce. Either the SEC is simply incompetent at its job or this is all political and has absolutely nothing to do with the fundamentals of whether these are securities or not

 

Or both.

[changegonnacome]

On 6/9/2023 at 1:20 PM, TwoCitiesCapital said:

Who approved Coinbase's IPO in 2018? The SEC. 

 

 I see that argument everywhere on twitter and this is why it doesn't work:

 

(1) IPO prospectus go out of their way to say that SEC approval for IPO does not constitute an endorsement that underlying companies activities have been checked and therefore arent endorsed to meet the legal requirements in every jurisdiction in which the company operates. That isn't the SEC's job in an IPO process. They go out of their way to put that on every initial public offering approval disclosure. An IPO process is a rules based process which is chiefly concerned with disclosures between a company and the would be investors in that company......it requires disclosures of risk etc. In advance of the IPO to get approval and then it requires disclosures on a go forward basis (10k, 8k, form4 etc.)......IPO approval and continued public company listing is not an endorsement by the SEC that said company is NOT doing anything ilegal. End of story.

 

Indeed Coinbase in their actual S1 risks section.....said that what they are going to sell could be deemed to be securities by various regulators around the world! This was in their high risk disclosure category - turns out they were right!!! Surely if your point has any merit ......they should have put in their S1 instead - "there's a risk this S1 wont be approved cause what we are selling could be deemed to be securities by US regulators/SEC - however if we do get approval to IPO it means the SEC has blessed all the assets on our platform & investors can consider this risk factor to not apply anymore"

 

(2) Even if you could argue that an SEC IPO authorization was in some sense a legality channel check ....on the underlying activities of a business ( it isn't see (1) above)....but lets pretend it is.....it does not preclude the reality that the day after SEC approval for an IPO - a company begins illegal activity....the list here is long....Enron, was a public company that was approved by the SEC for IPO....it likely began as a legit operation and morphed over time into criminal affair. In some respects Coinbase might be like this......if you've read the SEC compliant against them.....it appears in an effort to grow the business Coinbase (POST-IPO) began to add incremental more 'assets'/tokens on to the platform.....each incremental wave of tokens added pushed further into securities territory. I guess they had to grow that topline....and their 'rigorous' howey test compliance process got loosened up......the only way to grow a casino is to add more slot machines......Coinbase in an effort to grow....started getting cheeky with the slot machines they let in....and they getting whacked for it now.

 

Edited June 10, 2023 by changegonnacome

[changegonnacome]

More detailed run through of why the “SEC approved us to IPO” is Coinbase FUD:

 

 

[Gregmal]

9 hours ago, changegonnacome said:

1) IPO prospectus go out of their way to say that SEC approval for IPO does not constitute an endorsement that underlying companies activities have been checked

Exactly. That’s like the 2nd question on the Series 7. 

[changegonnacome]

Right so much of this crypto-debacle seems like a poor re-run of 1920's & 'blue sky' securities scam era with some techno utopianism & libertarianism thrown in to make it not seem a 100yrs old.......... in the 1920's the various scams that evolved were numerous when hucketers discovered that somebody could now literally sell a piece of paper (stock certificate) of zero inherent value but with a bunch of promises & a story attached to make that piece of paper more valuable over time to the gullible public. That ended with all our laws on the books re: securities......and this debacle is ending up the exact same way. Just with some additional techno babble & utility nonsense attached - 99.9% of these tokens are EXACTLY the same as blue sky securities.....or just securities.

 

There are very few arenas in life where you can sell inherently worthless pieces of paper or in this case of what's old is new again....'tokens' .....to  a person and where that person will hand over ten of thousands of dollars of REAL money for essentially a bunch of promises about what is going to happen next.

 

Like the 1920's.......so much harm can come from that opportunity for skullduggery that the space has to be regulated to within in an inch of its life......and even then what we have isn't perfect when you see so much of the promotes carried out in regulated public markets.

 

Cant help but feel now that we are at a turning point.........crypto/blockchain hype was a child of its time & a function of its ability to self-generate/self-fund hype that came from a profit pool rooted in securities offerings that relied upon regulatory arbitrage & a not insignificant amount of fraud...........everybody wants to know what the next big thing is that's gonna make them rich...the hot new thing!.......c.2015 after mobile internet & web 2.0 was done.....crypto filled the void of the next big thing from c.2015 to 2022........but the REAL next big thing just showed up and it's called A.I. and it already has products and use cases........christ even my mom has started using Bard at her job to write docs.......crypto/blockchain had like 13 years to get a product or service into my mother's hands.....and completely failed to do so. That is not the next big thing IMO. From hype-cycle to real products and services, at scale, should not take 13yrs....or being kinder lets date the hype to 2015...so lets call it 7 or 8 years.

 

Crypto/blockchain is the future & maybe it always will be.

 

For sure at this stage....I think we can say it wasn't the next big thing that it promised....maybe a much smaller 'thing' but not the earth shattering.....I don't see blockchain/crypto powered products anywhere in my day to day life...most likely the crypto era 2015-2023 (RIP).....was a very very old thing....a speculative mania driven by dreams of getting rich quick....enabled by the sale of unregistered securities. It amounted to very little real value creation relative to was expected.....just a bunch of trading profits, scams & heartbreak.

 

*I reserve the possibly that BTC....is a new form of digital gold.....an inherently worthless thing that through collective psychic agreement (delusion even) gathers enough people to make it so that it does become a good storehold of purchasing power in time akin to gold.

 

Edited June 11, 2023 by changegonnacome

[TwoCitiesCapital]

On 6/8/2023 at 3:08 PM, TwoCitiesCapital said:

I own Coinbase because I see them as being one of the few trusted intermediaries for buying/selling Bitcoin and Ethereum (amongst other alt coins) and an intermediary of a nascent NFT marketplace where I believe the potential for NFTs (for uses outside of cartoon monkeys) is huge. 

 

I also believe that most consumers will opt for an intermediary solution for buying/selling Bitcoin instead of developing the technical chops required to run a node, organize their own marketplace, and buy/sell to anonymous individuals over the web where the transfer being completed by both parties is uncertain. And I believe Coinbase will be one of the few direct beneficiaries of the consolidation of the space as many crypto intermediaries have gone bankrupt.

 

 

https://www.benzinga.com/markets/cryptocurrency/23/06/32820723/binance-us-on-life-support-market-makers-abandon-sinking-ship-as-coinbase-steals-the-crypt

 

"Binance.US’s market share paints a telling picture of its woes. In April, the exchange boasted a 20% market share, which has now dwindled to just 4.8%.

In contrast, Coinbase's market share has experienced a remarkable ascension, climbing from 46% to 64% within the past week."

[SharperDingaan]

It's beer making season ...  been out-of-office for a while.

 

For the most part the only people who need a crypto exchange, are those associated with the development community in some way. Crypto ETF's are widely available, some even have an option market, and investor protections are far better. Joe six-pack can do his crypto trade via any of a number of wealth management apps, he doesn't need a crypto exchange. Same as illegal drug dealing, regulatory requirements just drive a crypto exchange off-shore; all else remains the same.  

 

A great many crypto 'projects' are tech solutions looking for a market - that doesn't exist. CBDC is far better than the now obsolete 'Digi dollars', most Stable Coin works far better as a securitization vehicle, vs as a collateralization tool. Tokenization is not marketable until enabling laws exists; 'build it and they will come!' is a nice slogan, but not a viable business strategy. Reduce the continuous VC funding, reduce the number of crypto exchanges enabling liquidity, and much of crypto collapses. Higher BTC price volatility as a trading opportunity.

 

Blockchain remains a work-in-progress until affordable 'Blockchain Office' implementation tools can be bought off the shelf; most would expect that in a NA or Europe this is at least a decade away, maybe a little sooner in an Estonia. It will also not occur until stakeholders grant the social license to proceed with blockchain implementation. 

 

In the meantime ....

 

Expect CBDC to become increasingly mainstream, and the roll-out of updated securities trade/confirmation/settlement; financial industry disruption.

 

Expect regulated and local blockchain exchanges around green/grid electricity, and national regulated carbon credit trading platforms. Local platforms buying/selling local solar/wind generated electricity, for local use, throughout the 24-hour day; regulated carbon trading platforms overseen by central banks, with the validity of all traded credits verified by national Auditor Generals on a ongoing basis.  

 

IT increasingly returning to 'normal' business arrangements. Business making the business case, managing stakeholders, ranking projects on a NPV basis, and funding; IT doing the actual build and testing. This is 2023; you cannot build atomic bombs and claim that you aren't responsible for the radiation that the explosion releases.

 

Exciting times! and a great time to be a young person.

 

SD

 

 

 

Edited June 19, 2023 by SharperDingaan

[Dave86ch]

Even though I lean more towards Bitcoin, I still see many use cases for smart contracts.

 

Recently, I participated in an opportunity offered to vitaDAO owners to purchase the first IP-NFT asset, which represents the intellectual property ownership of a series of IP generated by a university research laboratory active in studying autophagy as a means to develop compounds useful for extending human life.

 

I find this concept interesting and exciting because health, and specifically nutrition, is one of my favorite topics. I've been fasting once a week for 24 hours for exactly three years because of the activation of the autophagy process during periods of caloric restriction.

 

This is not financial advice; a tiny portion of my capital was deployed mostly for educational purposes..

 

https://www.vitadao.com/blog-article/announcing-the-vita-fast-token-sale-for-viktor-korolchuk-lab