1/ This thread (and the various comments/responses within) deserves more attention. There is both incredible promise and incredible risk in including “real world assets” (#RWA) in #DeFi. As usual, @lex_node is asking very relevant questions.
2/ As a long-time RWA securitization lawyer who lived through 2008-9, I speak from direct experience here. The Financial Crisis arose from a paroxysm of yield-chasing leverage financing purportedly “safe” and “high quality” financial assets.

How about let’s not do that again?
3/ @lex_node correctly points out below that, wrt RWA, “transparency“ is not just about which assets exist (which you can determine with tools like Etherscan). It is also about the character and collectibility of the underlying RWA themselves in “meat space”.
4/ During the Crisis, there was scant accurate real-time information available to market participants, leading to a complete withdrawal of liquidity and utter collapse of asset prices.
5/ In response, the Dodd-Frank Act imposed a wide range of disclosures on various market participants (not just issuers) dealing in the newly defined “Exchange Act ABS”. These rules apply even to securities sold only to “accredited investors”.
6/ This is because it was recognized that the crisis was in significant part a failure of supposedly sophisticated private markets (e.g., the banks and hedge funds that bought CDOs).
7/ A good starting point to learn about the post-Crisis regulation of “asset-backed securities” for those interested can be found in this SEC release:

8/ To be clear, I would love to see new blockchain-based tools developed that can allow the efficient and effective securitization of RWA without the reliance on rent-seeking intermediaries. I believe this can be accomplished.
9/ But failing to understand or take stock of the the relationship between complex and highly leveraged securitization (blockchain-based or otherwise) and the potential for another crisis resulting from the sudden withdrawal of liquidity would be a grave mistake.

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More from @NYcryptolawyer

Jan 27
1/ For those who have been following my legal scholarship on #securities and #tokens e.g., papers.ssrn.com/sol3/papers.cf…), it is for exactly this moment that we have been doing this work.

The proposed rule amendments focus on “Communication Protocol Systems”.
2/ These are defined as “a system that offers protocols and the use of non-firm trading interest to bring together buyers and sellers of *securities*”. (My emphasis.)
3/ If most tokens themselves were to be considered “securities”, this would be exceedingly problematic, as @lex_node points out in his excellent piece here:

Read 7 tweets
Oct 28, 2021
1/ Like a strong weather pattern taking shape over the ocean, everyone knew an eventual landfall was coming. And it is here - @FATFNews dropped their final virtual asset service provider (#VASP) guidance this morning:


A ew thoughts…
2/ It could be much worse.

Whatever policy makers would like to do, the Guidance recognizes that there are significant limitations on what can be prescribed in terms of the implementation of AML/CFT-related checks in DeFi protocols.
3/ There are still many reasons to be concerned.

#FATF are still clearly skeptical of DeFi. The Guidance introduces two new vague standards. Even if a DeFi protocol is not “controlled”, if an entity can be identified who is engaged in “active facilitation” they may be a VASP.
Read 10 tweets
Jul 1, 2021
1/ We need a third way. Post project fundraise, the core problem is information asymmetry. Relying directly on a project to provide all “material” info to the public is hopeless.
2/ Project disclosure can and should be crowdsourced to a single location (think: Wikipedia).

Social and legal consequences would be meted out to those found to knowingly have provided misleading information (whoever they may be).
3/ Digital asset exchanges can be arbiters of the quality of the project information and be responsible for making reasonable determinations about its accuracy and completeness.

No project has a *right* to be listed.
Read 5 tweets
Mar 9, 2020
Another great discussion initiated by @lex_node based on a valuable piece on @coindesk written by @Frances_Coppola. As with many threads on Twitter, the tone quickly gets ... acerbic but it is a useful starting point to make a couple of important observations in both directions.
2/ As comments in the thread make clear, Coppola is focusing on “tokenizing” fungible and tangible assets. Her (spot on) point is that it is absurd to think that “blockchain“ can fix the trust issue when it comes to tangible IRL assets. However, I want to get to a deeper point.
3/ I spend quite a lot of time debating what is, and what is not a “security“. However, one thing is clear: in almost all cases, when you create a financial instrument backed by a pool of physical assets, under US law you have created a security.
Read 17 tweets
Dec 25, 2019
1/ Merry Christmas to all celebrating today! I would like to pick up on a point made in the thread below by @BoulevardLP. H/t to @insideNiMA to getting the ball rolling and @r_ross_campbell for the shout out. Will be curious as to thoughts from @lex_node, @propelforward +others.
2/ First, although the Turnkey Jet no-action letter is helpful (as is the @DLxLawLLP letter for @BuyQuarters), undoubtedly the most developed and relevant statement on this topic from the SEC is their April 2019 Token Framework - sec.gov/corpfin/framew….
3/ In addition, although the term “utility token” is commonly used, I would argue it is very unfortunate and confusing. There is no formal category of “utility token” anywhere in US law. A token (or any other asset) either is or is not a “security”.
Read 8 tweets
Aug 20, 2019
1/ Having so much fun with this thread - let’s add a hypothetical. Inspiration from our friends @coincenter. A developer team raises money by pre-selling a token that does not yet exist. H/t @jasonsomensatto @lex_node @propelforward @AndoniOlta @jchervinsky @LawxTechxArt
2/ During the pre-sale (which is open to the general public and not otherwise registered with the SEC), the developer team affirmatively reference the anticipated success of the platform they are building and the attendant economic benefits of owning the yet-to-be-developed token
3/ Purchasers send crypto to the developer team and, in exchange, designate a wallet address to which the tokens, once created, will be sent.
Read 10 tweets

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