Well, today we got two very different statements on crypto/DeFi/tokens from two SEC commissioners, Hester Pierce and Caroline Crenshaw.
I will probably write something longer about this soon, but for moment what really strikes me--and that I hope everyone in crypto will understand--is that regardless of where they land on the issues, their respective takes are *extremely* well informed.
These two commissioners have, directly as well as through very informed advisors, taken a keen interest in studying DeFi & grappling with the issues it presents.
That is the most important thing. When everyone in the debate is well informed, we can surface what the *real* issues are--beyond rhetoric of the "wild west" and images of "shadowy super hackers" controlling the world's finances in abandoned warehouses--and make real progress.
To me and others like @stephendpalley and @HesterPeirce, we are seeing a legal paradigm shift caused by a technological shift--one where perhaps new laws are needed to address autonomous technology design risks (vs. counterparty risks)
Others, like Commissioner Crenshaw, will more see how some human trust & possibility of exploitation is still involved in things, and point out that existing laws are good for dealing with those issues.
The hard part is--everyone who is well-informed is at least partly right, from a certain perspective.
I think all tokens could be securities, and it could be fine or good, as long as certain rules are adjusted.

I also think all tokens could be non-securities, and that could be fine and good, as long self-regulation is strong or some new rules are created.
Historically, though, the SEC has not pursued either of these pragmatic paths. In recent years, their 'settlements' have just destroyed value completely. Telegram was enjoined from even having a network, while other teams were required to 'disable' all tokens.
That is the one approach that just makes no sense, and almost shows a kind of bad faith.

I truly hope that finally the SEC will offer a viable, pragmatic path forward for people who simply want to write good software. I & other 'cryptolawyers' stand ready to help.
And of course my "i before e, except after c" grammar school brainwashing has betrayed me again

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More from @lex_node

11 Oct
Neurosis Token ($NEUR) is an insecurity.

Simply collateralize or wrap your existing tokens with $NEUR and they will be converted from non-compliant overconfident securities into fully compliant self-hating insecurities.
$NEUR will be airdropped only to U.S. persons.
Some people are asking about other $NEUR features:
--> stagflationary
--> aleatory (1M $NEUR randomly re-distributed every block)
-->negative 100,000% APY (drains all other tokens in your wallet--even your other wallets (thanks to our amazing partnership with @chain_analysis))
Read 4 tweets
11 Oct
good points from @stephendpalley

a smart gov't wouldn't "regulate devs" but would offer devs who do agree to be regulated certain safe harbors--e.g., 'get this license and we'll keep SEC away from you; otherwise, go take your chances with them'
@stephendpalley his key point is this & one I fully agree with--DeFi lacks both the traditional separation between ownership and control and 'counterparty' risk that most regulatory regimes are premised on

it has other sources of risk, but they are not addressed by those regulations:
@stephendpalley -->game theory risk (the risk that incentives designed into the system are inadequate to produce the desired outcomes)
-->tech implementation risk (the game theory is sound but implemented incorrectly)
Read 5 tweets
7 Oct
super simple fix to token securities laws:

*adapt section 13 and section 16, and call it a day--they would give all and only the needed disclosure

*don't regulate the tokens themselves as securities (unless that comes with a special version of secondary rules that works)
*a business developing software a deployed instance of which has native tokens valued at $1B+ must have its "insiders" (execs and token whales) file section 16 insider trading reports regarding that token (like insiders of public companies)
*a 10% plus holder of the token must also file section 16 reports

*any 5%+ holder (even if not in the biz of developing the software) must file section 13 reports

no financials, no CD&A, no executive comp disclosures, etc.--none of these things matter
Read 10 tweets
26 Sep
@MoneyGodRAI deserves to be at the top here--a non-pegged but volatility-resistant store of value fully collateralized with only cryptonative assets (currently ETH). But here are my broader legal-ish thoughts on the stablecoin space:
Pegged stablecoins are either collateralized or un-collateralized.

Collateralized pegged stablecoins (like DAI, not RAI) are probably all securities & regulation-vulnerable. Even if some are not securities, they require too much trust & pose too much systemic risk.
Un-collateralized 'algo' stables have failed repeatedly, but in theory can be non-securities & reg-resistant because not 'governed' or 'backed'--they just rely on a native incentive for arbing to peg, & 'hope' that people sufficiently respond to that incentive to hold the peg.
Read 15 tweets
22 Sep
no, letting a multi-billion-$ financial system develop for years with little guidance & then crashing it with a sudden politically motivated 'crackdown' is a "threat to the financial system"
Enron was an SEC-reporting company
Read 11 tweets
21 Sep
this would indeed be a wonderful thing

but it's not the full story...put simply, if most tokens are securities and AMMs are securities exchanges, then essentially all current token transactions are illegal, whether informed or uninformed
there is no current way to register any smart contract system with the SEC as a securities exchange

even if you could, it would automatically be violating the exchange requirements, as it cannot KYC its users, reverse transactions, etc.
in other words: a government-regulated disclosure regime relating to crypto technology risks would, in my opinion, be a wonderful thing...but it has to work without simply killing the technology...the non-disclosure parts of the securities laws would kill current tech
Read 4 tweets

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