, 73 tweets, 82 min read Read on Twitter
Good morning! I’ll be live-tweeting the SEC’s FinTech forum from NYC. I’ll be watching the livestream and I have some colleagues there in DC.
I’m on my second cup of coffee and I’ve got my Twitter fingers fired-up!
(FYI tweets are my own and not necessarily the views of my employer)
You can also watch the live-stream here: sec.gov/fintech-forum/…
Valerie Szczepanik has started her opening remarks. Almost exactly one year ago she was named the SEC’s Senior Advisor for Digital Assets and Innovation: sec.gov/news/press-rel… @SEC_News #SECfintech
@SEC_News Valerie was named the head of FinHub when it was launched in October sec.gov/news/press-rel… #SECfintech
@SEC_News Valerie is talking about the benefits of FinHub, including engaging with the public. Here's a photo from SEC HQ from one of my colleagues. #SECfintech
@SEC_News Valerie using the blockchain as an analogy for the information sharing between the public and SEC staff. #SECfintech
@SEC_News Valerie encourages the "builders" to take a look at what needs to be fixed. #SECfintech
@SEC_News Valerie is talking about an interaction she had with an entrepreneur about the custody rule. Here's a proposal for broker-dealer custody of digital assets sidley.com/en/insights/pu…
@SEC_News "Look for the hiring announcement in the coming days" #SECfintech
@SEC_News Blanket disclaimer from Valerie on all the SEC speakers and moderators: they are their own views and not necessarily those of the SEC
@SEC_News Surprise appearance by SEC Chairman Jay Clayton. He was not listed on the program. #SECfintech
@SEC_News Chairman Clayton is thanking the various SEC divisions for their contributions to this area.
@SEC_News Chairman Clayton is introducing another surprise guest: Commissioner Hester Peirce (aka "Crypto Mom") and complimenting her leadership in this area.
@SEC_News Commissioner Peirce bringing some levity to the morning by talking about the Scripps National Spelling B also happening in DC. #SECFintech
@SEC_News Great analogy to technology: because of spell check we don't spell as well as we used to. #SECfintech
@SEC_News Commissioner @HesterPeirce looks forward to hearing from participants about what they are seeing on the front lines #SECfintech
@SEC_News @HesterPeirce Next are remarks by William Hinman, Director, Division of Corporation Finance (aka CorpFin). We are about 2 wks shy of the one year anniversary of his When Howey Met Gary (Plastic) speech: sec.gov/news/speech/sp… #SECfintech
Or as I and other lawyers in this area remember it, the day we looked like this:
Director Hinman talking about the TurnkeyJet No Action Letter: sec.gov/divisions/corp…
He believes flexible rules provide more protection for investors than bright lines. #SECfintech
They often see the need for issuers to clarify the business plan, explain where they are in the development process. Accounting matters often need to be explained. How will the token operate? What are the governance aspects? #SECfintech
He wants to understand the security of private keys. What rights will the token holders have? Tell them more about the valuation the issuer will take in as consideration. These are all some examples of things they are working through with issuers. #SECfintech
Panel 1 is on capital formation considerations. Moderated by Jonathan Ingram, Chief Legal Advisor, FinHub, Division of Corporation Finance @SEC_News. Panelists are @pbrody (@EYnews), @josh_blockchain (Klayman LLC), and @awrigh01 (@CardozoLaw) #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw This panel will go to about 11:00. The final 10 minutes will be for questions from the audience and remote audience. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw The first question is on what trends people are seeing. The first panelist giving a caution that this is not legal or investment advice. Also that you can't hold "digital tokens" in your hands. #SECfintech
Sorry, broke the thread. Pick-up the rest here: #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw There is a lot of interest in security token issuance and thinking of other types of assets that may not necessarily fall under the rubric of securities laws. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A lot of these projects want to use open source software and they view "utility" based models as a way to do that. Also seeing debt products emerging. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Thinks there will be a lot of activity in making debt markets more efficient. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw One panelist is less interested in just putting things on the blockchain and making things incrementally more efficient. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw He wants to see blending of capital and operating infrastructure for truly novel solutions. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A panelist is pointing out the distortive impact of capital mainly being available in NY and CA. This technology has the ability to potentially open-up access to capital markets. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A technology that effectively "puts an investment bank in your pocket" is powerful and we also have to be sure that investors are protected. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A panelist is pointing out the flexibility of entrepreneurs in the rights that they can provide to investors and purchasers of digital assets. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw If an entrepreneur is giving-up a lot of control of their company to investors this can limit their innovation. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Discussion of SEC FinHub's Digital Asset Framework. Here is our recent client alert on the subject: sidley.com/en/insights/ne… #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Moderator asks what impact the Framework has had on non-lawyers. One panelist says the reaction at first was very positive, but many don't to want to go first. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Entrepreneurs want regulatory frameworks that empower them and don't automatically treat them as bad actors, but also push bad actors out of the marketplace. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw The SEC is happy to meet with entrepreneurs to discuss their projects. #SECfinhub
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Question: is it possible to program the technology for regulatory compliance? Answer: Yes, but many don't want to because imposing these restrictions will impact the resale on the secondary market (which this panelist thinks is an unacceptable answer). #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw It is do-able and this panelist thinks it should be done. Another panelist points out that smart contracts are very flexible. The fact that you can create a token as a scarce asset is a game-changer for things like IP rights. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw The rules that you can encode must be objective in some sort of way and must be able to be encoded. Many things can be programmed, but not everything. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Panelist mentioning tax payments encoded into smart contracts. Side note: IRS Commissioner says new crypto tax guidance could come within 30 days: news.bloombergtax.com/daily-tax-repo…
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A panelist asks what is the exchange's responsibility to make sure that, e.g., US person's don't end up on the exchange? #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Moderator asks about audit nodes. Panelist: this is not account advice. Goal is real-time verification of data. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw He believes that the future of blockchain transactions is not going to be easily readable due to privacy technology. So it won't be possible to see who received the tokens or the amount. But you can give your auditor access to see the flows. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Moderator asks which disclosures are important to investors when securities are issued using distributed ledger technology? #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Panelist says that it really comes down to what the asset is. If it is a security, there is a robust regime. What are the rights associated with the asset? How will the token be distributed? Will those who are helping to build the project receive tokens? #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw What if there are bugs in the code? Thinks that projects should disclose if they are working with lawyers. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Also an issue in the difference between natural language and code. What if those who prepare the documentation don't understand the code? Or what if there are malicious actors using the code to defraud? #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Another panelist points out that regardless of whether the token is a security there are things that purchasers will want to know: e.g. lock-up period, whether founders received tokens. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Moderator asks whether investors are getting these disclosures today. Panelist: depends on the project. Many do, but some don't. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Panelist points out that there are white papers out there that you can't tell if it was written by a genius, a fool, or a scam artist. This is what the SEC's Howeycoins investor education site was meant to show. howeycoins.com/index.html #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Panelist says we want to get to a place where the documentation is in plain English, crisp and clear, and online so that investors can easily learn about what they are purchasing. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A long-standing issue is that people don't always read the documentation, whether it is a click-wrap agreement or a securities disclosure. We should design a system that understands that human behavior. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw One way to get to this is standardization of the rights and functions that each type of token has (e.g., ERC-20) so that when people see that type of token it is, they will automatically understand a lot about what they are buying. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Question: how are the assets that are being raised being managed by projects? Answer from panelist: it varies. There are more and more custody solutions. Started out with essentially people putting it under their mattress. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw A related issue is whether the projects traded-out of e.g., bitcoin and ether quickly after fundraising, or whether they held onto these digital assets. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Panelist pointing out that there are good things to be learned from the Swiss Foundation model that was popular a few years ago. For example, having a board for governance so that people will analyze and discuss issues. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Question: Is there a key-take away that you want the audience to have? Panelist: there's tremendous potential here. Continued dialogue among the various players will help us promote innovation while protecting main street investors. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Another panelist: what is the purpose of capital markets? Take capital from investors and put it to productive use. He thinks we are failing at this. By his measure 83% is for gaming and the like. #SECFintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Need to ask how can we put this technology to work for a productive use? Third panelist agrees, and thinks it is similar to the early days of the internet: lots of possibility in the technology. "A tremendous gift to the world" #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw If we do things right, there's tremendous opportunity for businesses and investors. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Question from the audience/livestream: Has there been ongoing disclosure on the status of development of projects? #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Panelist says they looked at this. It was "remarkably difficult" to get good information. Level of ongoing disclosure is really patchy. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Another panelist says that she believes updates are often given in non-traditional ways, e.g. meetups. #SECfintech
@SEC_News @pbrody @EYnews @josh_blockchain @awrigh01 @CardozoLaw Third panelist says the good projects are doing this: they disclose on GitHub, Twitter, Reddit, etc. #SECfintech
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