We all knew that this day would come, when the enforcement arm of the Federal Government that regulates the finance industry finally cracks down on the cryptos.
On July 25th 2017, the Securitas and Exchange Commission issued a press release regarding crypto currencies and Initial Coin Offerings (ICOs):
“…The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors' protection.”
Under the guise of protecting investors, who could just as easily protect themselves by not participating in ICOs, the SEC now considers blockchain technology and cryptocurrencies “securities” and therefore under their jurisdiction.
For those not familiar with finance, let me explain the significance of this development. Cryptocurrencies have introduced a way for entrepreneurs to raise capital and essentially finance their ventures through equity in a way that otherwise would be impossible in this country. In order to buy any equity that is not traded publicly, one must be a either a “sophisticated investor” or “accredited investor,” which of course have specific definitions under SEC law. These qualifications for becoming accredited or sophisticated are: an income in the hundreds of thousands annually or a net worth of over a million dollars - basically not your average Joe.
And for what purpose is the SEC so concerned with the trading of equity? After all it is one of the most common ways of financing just about anything. Is it because we, the public, are too stupid to manage our own finances? Or is it to protect those that are threatened by free market ventures?
The bottom line: You do not compete with the equity markets of the Fortune 500 companies, or the US Treasury market.
Financing our world through equity was a concept first introduced to me by Catherine Austin Fitts. Imagine this, instead of having a 401k full of blue chip stock from some Fortune 500 company, you own equity in the private school your child attends. Or you might for example, own equity in your home owner’s association. Why is your retirement not diversified into something more local and home grown? - Because it is illegal, and because it competes with the big boys over on Wall Street and in DC.
Sources:
Security and Exchange Commission. SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities. July 25th 2017. https://www.sec.gov/news/press-release/2017-131
Investopedia. Accredited Investor.
http://www.investopedia.com/terms/a/accreditedinvestor.asp
Investopedia. Sophisticated Investor.
http://www.investopedia.com/terms/s/sophisticatedinvestor.asp