This article is a must read.
https://coinfire.cf/2014/10/27/sec-begins-sending-investigation-letters/ or this
https://www.cryptocoinsnews.com/sec-sends-inquiry-letters-hundreds-bitcoin-companies-unregistered-securities/
This begets the question: How can we keep our AE in check? Decentralization is a double edged sword. It allows for all parties to do whatever they want with the AE. That is provided everyone is honest and good about it. How do we prevent scammers and the irresponsible from abusing the AE?
Look at NEMstake in the Nxt AE. There is one scammer and there is another one (NEM), which is the proper one.
Now that NEM is new and about to do our own AE, what do you all suggest? Have a central authority to control? Leave it alone and let people abuse it forever and turn this into a "rubbish" ecosystem?
Some input from the community will be good.
Hi Rocket,
the link doesn't work but I think you are referring to this, right? https://www.cryptocoinsnews.com/sec-sends-inquiry-letters-hundreds-bitcoin-companies-unregistered-securities/
As far as I can tell, this is really bad news for crypto in general.
I am just wondering, are any of our devs based out of the US?
It's not the platform they are going after… It's the illegal companies doing ipos… Keep everything as decentralized as possible imo…
I don't get it. Too many terms I don't understand as a none native english speaker.
For what reason are they "going after" bitcoin companies?
Why do you think as system like AE is in danger itself?
Its hard for me to understand too. Please somebody correct me if I am wrong.
A guy named Erik started a gambling website. In the summer of 2012 he went on BTT and said, send me bitcoin and you will own part of my company. People did. He eventually sold the company and paid back quite a bit of bitcoin which turned out to be a nice profit for the investors at the time.
If you are an American in America with an American business and you want to sell shares in your company, it has to be registered with the SEC. He didn't register. He got raided. He had to pay a lot of money in fines.
As far as I can tell, it doesn't affect NEM so much but I can't be sure.
There are two ways that NEM could be affected.
1. When NEM was released on BTT people paid money for 1 part of the NEM ecosystem. I am not sure if this is an IPO or not. It is kind of like a presale, but the official NEM story is that it was a call for participation and donation. At no point was UP saying that the people would get shares in NEM. Though some people did get NEMstakes on the NXT asset exchange so I am not exactly sure how that works out.
2. NEM will most likely have its own Asset Exchange and it is possible that companies might want to do fundraisers by selling shares on it. If they are in the United States and NEM's head quarters are in the United States, it could send the SEC to knock on NEM's door. Maybe not to raid NEM itself, but to look at what NEM's companies on the asset exchange did.
Again, as far as I can tell, it doesn't affect us directly (yet).
The people that should be worried right now are people like James over at NXT. He has raised millions of dollars in assets that are basically shares in companies. I doubt he is an American, but if he is, there will be serious heat.
CfB also released shares of JINN on NXT asset exchange. We all know he isn't American, so he is probably okay. I have posted there on his thread trying to get more information and am awaiting a reply. I am assuming that when they set up JINN that they looked into this.
You must keep in mind that what you and me call an IPO and what the government calls an IPO are two different things. If money was raised and given to an entity with the chance of financial gains then that could be seen as an IPO, it doesn't have to be shares. Calling it a call for participation or donation won't matter, people still received a stake which could be sold. I also don't know how all this is going to play out, but one thing I know is that if money is involved the government will do what it can to get it's share.
I agree that the government wants some money! That is why I am glad Rocket posted this and we are having this conversation.
SEC powers and regulations do not confine to U.S citizens only. If you are selling shares to U.S citizens, you are liable to prosecution regardless your nationalities. So you could be okay if you are from a certain foreign countries but theoretically you could be detained if you happen to break U.S laws and travel to a U.S friendly country.
That's a general concern to keep in mind, but I would not be worried too much right now. It is more interesting to keep an eye on certain high profile cases like Bitshares, Mastercoin, CounterParty etc.
The best choice would allow anyone to list an asset, however, we should have an algorithm that calculates risk for each asset. Inputs into the algorithm could include time listed, amount transacted, amount of original transactors, volatility, market cap, etc. We could only have assets that meet a certain level of risk display in the community client. A number beside each asset could represent the level of risk.
Individuals would then see a higher percentage of reputable assets when searching in the community client. Open access to all, limited access in the official client.
Tell me what you think…
-Erik
Edit: This same idea could be applied to any decentralized store. If NEM ever wanted to create an app / add-on store we would likely need new inputs to the algorithm, but the same principle could be applied.
Suggest to split NEM asset exchange.
A NEM team checks asset and issuer and approves (AE list one)
AE list two is for assets without approval.
(more lists may be useful for further distinctions)
Issuer can decide to go through approval check for list one or to add asset to list two.
Don't know if this is a practical way to screen assets and issuer but it may help investors to decide between "more safe" and "less safe" investments.
In German stock exchanges investors can decide to invest in more (listed) or in less (other list) approved companies.
The best choice would allow anyone to list an asset, however, we should have an algorithm that calculates risk for each asset. Inputs into the algorithm could include time listed, amount transacted, amount of original transactors, volatility, market cap, etc. We could only have assets that meet a certain level of risk display in the community client. A number beside each asset could represent the level of risk.
Individuals would then see a higher percentage of reputable assets when searching in the community client. Open access to all, limited access in the official client.
The announced Eigentrust++ reputation system would be a huge indicator on how much risk comes with an asset/marketplace seller.
Assuming the trust system works and can
This is a healthy discussion to have and I'm glad we are having it, however, as always, there seem to be a lot of unfounded rumors floating around in the crypto community.
Please see an update from coindesk on the matter: http://www.coindesk.com/crypto-2-0-companies-rebuff-sec-crackdown-rumors/
For the benefit of those who are not sure what this is all about. If any company raises fiat money for an instrument offered by the company to the Public, they must seek approval from SEC USA IF they wish to sell to USA Residents.
Although Cryptos are not recognized as fiat money, in this instance, the SEC conveniently classifies this as fiat money based on their broad brush definition. No two ways about it.
An Instrument here is defined as a loan stock, debenture, equity, preferred stock, warrant, derivative, options, etc. Anything that purports to possibly result in a "return on investment".
Effectively it is a PUBLIC OFFER. Crowdfunding is a PUBLIC OFFER. Listing in the traditional exchanges is a PUBLIC OFFER. An Initial Public Offer (IPO) means it is the first time offered to the Public. Traditionally, an IPO requires jurisdiction approval wherever it is being done.
The Internet has broken down borders but the USA SEC requires that any instrument sold to a USA resident must be registered with the SEC otherwise they will be in breach of their regulations and requirements.
Crowdfunding by a company is therefore illegal if one does not register with the SEC of the USA and with any country for that matter, except, many countries are not as desperate as the USA to start fining these people for revenue. They don't really care.
Crowdfunding is illegal unless one decides to list in a legal Crowdfunding Platform like Second Market.
Crowdsale, as in the case of NEM selling coins in the early beginning is different. Crowdsale is about selling something and it is not about selling an instrument with some expected returns. It is like selling a book or a pen. That is ok.
So, if an AE which is a decentralized concerned is out there, it is ok but the offerors need to be aware of their limitations in their offerings. If they want to do a crowdsale, it is ok. If they want to do a crowdfund, they need to get approval from SEC USA if they want to offer to USA Residents.
So, all that is going on in the Nxt AE that offer Crowdfund are mostly illegal. So, bottom line, the onus is on the offeror to make sure that they are doing things the right way.
In NEM, especially in AltNemo's case, we have always been very careful about how we do things.
Hope that clears up the air.
Suggest to split NEM asset exchange.
A NEM team checks asset and issuer and approves (AE list one)
AE list two is for assets without approval.
(more lists may be useful for further distinctions)
Issuer can decide to go through approval check for list one or to add asset to list two.
Don't know if this is a practical way to screen assets and issuer but it may help investors to decide between "more safe" and "less safe" investments.
In German stock exchanges investors can decide to invest in more (listed) or in less (other list) approved companies.
I like your idea. If people want to play the libertarian turf, they can "list" whatever they want in the decentralized platform.
If people want to be legal and above board (centralized rule), they go through a central body, pay some fee for adjudication, get rated and then list in the AE.
Sounds like a good idea. Best I heard so far. Nothing beats an old man's thoughts and experience. ;)
1. When NEM was released on BTT people paid money for 1 part of the NEM ecosystem. I am not sure if this is an IPO or not. It is kind of like a presale, but the official NEM story is that it was a call for participation and donation. At no point was UP saying that the people would get shares in NEM. Though some people did get NEMstakes on the NXT asset exchange so I am not exactly sure how that works out.
This was a crowdsale. It was never an IPO in SEC's definition.
2. NEM will most likely have its own Asset Exchange and it is possible that companies might want to do fundraisers by selling shares on it. If they are in the United States and NEM's head quarters are in the United States, it could send the SEC to knock on NEM's door. Maybe not to raid NEM itself, but to look at what NEM's companies on the asset exchange did.
Again, as far as I can tell, it doesn't affect us directly (yet).
NEM is not into the business of operating an Asset Exchange. The asset exchange is public utility. NEM is not an entity, like Bitcoin or NXT, NEM is only a namesake to a project.
The people that should be worried right now are people like James over at NXT. He has raised millions of dollars in assets that are basically shares in companies. I doubt he is an American, but if he is, there will be serious heat.
CfB also released shares of JINN on NXT asset exchange. We all know he isn't American, so he is probably okay. I have posted there on his thread trying to get more information and am awaiting a reply. I am assuming that when they set up JINN that they looked into this.
They are not OK if they sell to a US Resident.
good links and information guys. this helps clear up a lot in my mind.
Just read all this crazy stuff. Wonder how shite life would be in The Americas :-[
Just read all this crazy stuff. Wonder how shite life would be in The Americas :-[
Apparently the rate of Americans giving up their citizenship is getting much higher now.