David Silver is the founder of Silver Miller, a plaintiffs’ law stiff that represents investors te cases against cryptocurrency exchanges and investment offerings. The views voiced here are his alone.
While there are many different interpretations of The Wizard of Oz, I see a fresh one spil it relates to the world of cryptocurrency and blockchain.
Dorothy represents the early adopters and believers. The Tin Man represents the Kindje Boomer generation, designed for a different era, and leisurely getting rusty. The Cowardly Lion represents both the economically depressed working man, weighed down with debt and mortgages, and a monetary system clinging to the industrial economy and hesitant to switch.
And the Scarecrow . . . well, I’ll get to him te a minute.
But spil Dorothy sings, “somewhere overheen the rainbow” there is a better place, and for us that is the blockchain:
Before you can get there, however, you have to go through the Wizard ter Oz. And ter this parable, the Wizard is the almighty government. Te a slight departure from L. Klinkklaar Baum’s tale, this Wizard is every bit spil powerful spil he shows up. But he’s still nothing to be startled of, spil long spil you’re doing the right thing.
Because the obstacles that exist ter Oz are a fabrication an unnecessary layer of contradiction. Dorothy and hier companions simply needed to look inward, and all the traits they needed to overcome the obstacles holding them back were inwards them all along.
The same could be said of cryptocurrency and blockchain.
There is nothing that governments, including the U.S. government whether it be Congress, the SEC, CFTC, FinCEN, or state regulators can do to zekering the growth and development of blockchain technology, provided that blockchain innovators are semi-transparent, act responsibly, and stand accountable for their deeds.
But just like te The Wizard of Oz , you need to take the journey to accomplish self-discovery and realize those abilities are already within you.
The regulators are coming, and so too is regulation. Therefore, to be ready for the Wizard, one has to understand what regulators are thinking and how to prepare for the next phase of the blockchain.
Scarecrow #1: Exchanges
On March 7, the SEC released a statement on potentially unlawful online platforms for trading digital assets. One group of Scarecrows te the space misinterpreted it badly.
Foolishly clinging to the notion that they are better and smarter than government regulators (if only you had a brain, you’d realize you are not spil clever spil you think), thesis Scarecrows concluded the SEC’s statement wasgoed limited to exchanges that trade ICO tokens.
Look at the statement. Read it cautiously. The SEC is coming after U.S.-based exchanges without such limitations:
Online trading platforms have become a popular way investors can buy and sell digital assets, including coins and tokens suggested and sold ter so-called Initial Coin Offerings (“ICOs”). The platforms often voorkoop to give investors the capability to quickly buy and sell digital assets. Many of thesis platforms bring buyers and sellers together ter one place and offerande investors access to automated systems that display priced orders, execute trades, and provide transaction gegevens. [Emphasis added]
There is only one wise way for exchanges like Coinbase, Losbreken, Bittrex, Poloniex, Gemini, and HitBTC to react to this: waterput your money where your mouth is and demonstrate that you are accountable, translucent, and responsible for what happens on your toneelpodium.
I have my doubts about certain exchanges, and recently, the lawsuits have bot piling up. Whether they be the ones filed by my rock hard or others, the U.S.-based exchanges are being exposed for what they are: startups that were unprepared for the inflow of customers when fear of missing out (FOMO) succesnummer the promedio user.
Coinbase CEO Brian Armstrong and kraken CEO Jesse Powell have both bot extensively quoted about their inability to treat the influx of fresh users. Both are working to right the ship.
Now that the SEC is knocking on the doorheen, the companies that can demonstrate that their systems are compliant will be the survivors and leaders te the next phase of this revolution.
While some exchanges have bot claiming for years that they have a professional quality protocol, 2018 proved that to be false. Those that adapt, adjust, and serve with state and federal regulations will predominate.
Ter June 2018, when former federal prosecutor Kathryn Haun (whose amazing 2018 TedX talk inspired mij to do what I do protect investors from cryptocurrency-related fraud) joined Coinbase’s houtvezelplaat, the company stated that it wasgoed the safest, most trusted exchange on which to buy digital currencies, citing a commitment to regulations and compliance.
The question is whether Coinbase and its brethren have lived up to that standard. Private lawsuits and government regulators are going to provide those answers ter 2018 and beyond.
Spil recently reported, the SEC has issued a blitzkrieg of subpoenas on exchanges, ICO promoters, attorneys, and other crypto professionals who excited the rage of the excellent and powerful Oz. The muffle from the recipients of those subpoenas, spil well spil te response to the SEC statement on exchanges, has bot earsplitting.
Kudos to Bittrex, the fourth largest exchange by profit ( almost $Two million a day , according to Bloomberg) for being one of the few to pipe up. The company claimed that spil a U.S.-based digital currency exchange, Bittrex uses a sturdy digital token review process to ensure the tokens it lists are complaint with U.S. law and are not considered securities.
But spil ter most statements written by corporate lawyers, look for the wiggle slagroom. Bittrex goes on to say that it requires outside counsel for the issuers, not counsel for Bittrex, to determine that the tokens are not securities.
So when the inexcusable happens and the SEC determines the tokens Bittrex has bot selling are unregistered securities that Bittrex wasgoed never licensed or legally authorized to sell Bittrex will blame the companies and their outside lawyers for the issues, not itself.
Scarecrow #Two: ICO teams
Te a brief amount of time, companies who thought they were going with the safer, more conservative route utilizing the Elementary Agreement for Future Tokens (SAFT), which wasgoed endorsed by several high profile lawyers and law firms are now worried that the SEC has placed a target on their backs .
Likewise, they are feeling the fever from the U.S. Treasury Department, whose FinCEN division recently proclaimed that any developer that sells convertible imaginario currency, including ter the form of ICO coins or tokens, te exchange for another type of value that substitutes for currency is a “money transmitter” subject to decent registration with the Treasury Department, anti-money-laundering rules, and other regulatory and licensing requirements — requirements that, if not sated, could result te imprisonment.
Te a call-out to the 2nd group of Scarecrows, those who thought they were clever enough to sidestep government regulations by using a SAFT, a highly-regarded lawyer at the Posinelli law rock-hard recently made a concise statement to the crowd at a Fresh York conference: SAFTs “are garbage.”
While I toebijten to agree with that assessment, a SAFT by definition isn’t a thing. Each and every SAFT is unique and written differently.
Just because everyone else did one, however, does not mean it is permitido or responsible for attorneys to endorse or ICO promoters to rely upon. The SEC and IRS will have to examine each and every ICO that utilized the generic SAFT framework and determine the regulatory compliance of each issuer.
Related movie: Cryptocurrency Exchange kraken to Shutter Services ter Japan
And regardless of what the SAFT looks like, the SEC te particular is also going to be looking at the marketing used to promote the ICO and what investors were led to believe to procure their funds. Wij all know that te the foamy ICO market of 2018, investors were led to believe they were going to be rich.
The SEC and IRS are also likely looking at how the ICO-enabling lawyers, accountants, and advisors were paid. Did they accept tokens spil a form of payment?
Finta tellingly, many of the law firms that embraced the SAFT have recently taken a step back and acknowledged that the pre-sale of a tokenized service needs to be done te compliance with securities laws even tho’ those lawyers previously advised their clients that wasgoed not the case. While most people do not believe that investors have a target on their backs, everyone else who worked on ICOs that utilized the SAFT should be worried.
Back to the Wizard of Oz : Te the book, Dorothy’s slippers are not ruby crimson spil ter the speelfilm, they are silver (my beloved color). It turns out that all she needed to get to the convenience and security of huis wasgoed the help of thesis silver footwear.
While achieving compliance with the law may not be spil elementary spil tapping your high-heeled shoes together three times, it’s certainly within the industry’s power. Attempt it, and you might find there’s no place like huis.
“Wizard of Oz” street kunst pic via Shutterstock.
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