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Saturday morning - time for kids cartoons and ... a (ramen-free) Twitter thread on tokens and securities law! Today’s starting point: this excellent article (decryptmedia.com/6142/will-cons…) by Guillermo Jimenez in Decrypt.
2/ Jimenez looks at the concept of “consumer token offerings” through the lens of the recent sales by FOAM and Civil, companies backed by @ConsenSys. Both sales were open to the general public and not limited only to “accredited investors”.
3/ Why are these sales and how they were conducted so important? This goes to the heart of what in my view is the most exciting aspect of #valuetechnology: the ability to use the tools that comprise “#blockchain technology” to create new business models.
4/ To understand the importance of this, we must go back to the late 1800s and the roots of the earliest meaningful debates about “capitalism“ as a viable socio-economic system.
5/ “Socialism”, “collectivism” - whichever term you choose to use - raised fundamental questions about the fairness of capitalism as it was implemented at the time.
6/ Industrialization and other technological innovations of the “modern era” drove incredible advances in productivity and efficiency at the cost of the disenfranchisement of millions of people: should anyone be surprised about the political upheaval that followed?
7/ Vibrant marketplaces, when properly implemented, are the best (perhaps only?) ways to balance the critical need to allocate capital to its highest and best use ...
7a/ ... while avoiding the putrid stagnation of the “rich-get-richer” implementation of what these days passes for “captialism” (viz: #collegeadmissionsscandal).
8/ Rather then talk about the mechanism designs enabled by blockchain as “decentralized”, I prefer to see them as open marketplaces for both production and consumption. As @MattCorva points out in the article, this is what both FOAM and Civil are seeking to achieve.
9/ These companies are using the next wave of technological innovation, not to further entrench capital, but instead to open it up to the fresh air of global engagement.
10/ Anyone with Internet access can participate in these marketplaces through the ownership and trading of the cryptographic tokens that are an inherent part of these platforms.
11/ Or can they?
12/ As @PatBerarducci often observes, when these tokens are treated as “securities” in the US, the only people able to engage with the platforms as a practical matter are “accredited investors” - completely defying the spirit and objective of an open global marketplace.
13/ Even when tokens sold this way (under “Reg D”) become “unrestricted“ after one year, as @propelforward will be quick to remind you, they would still be “securities”.
14/ Even if the tokens were registered with the SEC so that they could be sold to the general public, @stephendpalley will remind you that they would still be “securities”. News flash: most regular folks don’t have securities accounts! (@CaitlinLong_ )
15/ As Jimenez flagged, it is critical to recognize that there is an important and separate discussion to be had around the status of a fundraising using the sale of tokens and how such a fundraising should be properly characterized. Call 1-800-@dcsilver if you want to rhumba.
16/ But when it comes to the tokens themselves and their functioning inside an open, blockchain-based system, there should be no debate at all ...
17/ ... courts, policymakers, regulators and, most importantly, the public, need to recognize that these tokens are not “securities”, and should not be regulated that way. (Though, careful: @ofnumbers might try to debate you anyway.)
18/ The most important thing: whether you agree or disagree (looking at you, @lex_node!), this is a crucial debate which goes to the very heart of what this technology is about. The only mistake you could make is not to #engage. (Thnk you @AndreaTinianow for keeping us centered)
19/ Hats off to @decryptmedia @coindesk (@MarcHochstein @AaronWStanley), @TheBlock__ and policy advocates like @DigitalChamber @coincenter and @TheBKP_Official and many others for keeping this discussion front and center in the blockchain community. [end]
