Why don't rich people need protection? Here's the answer: this is their protection. It reduces their competition.
Seriously, these securities rules keep people like me from investing in AirBnB and Uber (two that I caught very early and wanted into)... but we can all go to Vegas and lose $100k in a single weekend. But putting $10k into Uber's seed round is somehow a crime I need to be protected from? Truth of the matter is this is the essence of capitalism-- it is my right to invest in Uber's seed round and Uber's right to have me as an investor (if they consent), whether I am "accredited" or not. This is basic "Freedom of association" which underpins everything from gay marriage to the right to refuse service to barefoot people.
Also, of course, I've lost my own $10k on more than one occasions starting companies. (And I've made much more as well.) Why do I need protection from myself? Especially when the terms of that protection are written by people who don't know what SHA256 is.
No, these regulations mainly keep the middle class and the not-quite-wealthy-enough from investing in the highest upside opportunities. I know it's better to put $10k into 10 different seed rounds than $100k into one seed round. I don't need to be accredited to know that.
And I've certainly lost a lot more than that (and made even more) in the stock market using complicated options strategies involving multiple legs and expirations-- I'm the very definition of a sophisticated investor....
.... but I can't be trusted to give a startup $10k?
This is what regulation tends to do, which people don't seem to get -- it raises the bar keeping the little guy out.
Once again, the rich get richer and the poor and middle class have less opportunity.
PS-- To those responding: Yes, I have heard "but what about the grandmas? won't anyone think of the grandmas???" before. I'm acutely aware of the history of this type of regulation in the USA. Ultimately this stuff keeps grandmas poor.
You should all read G. Edward Griffens "The Creature from Jekyll Island". It's a history book about money, but it's not in the least dry.
Government always has an excuse, usually a claim to be helping or protecting people, when it violates our rights.
Keeping me out of Uber's seed round is a violation of my rights.
It ultimately comes down to what flavour of politics you subscribe to. The key question is whether you think that the public should be protected against the abuses of the free market, or if the free market should be a complete free-for-all. For example, Dodd-Frank solved a concrete problem, and there have been countless studies that show it it responsible for stabilizing the US economy.
But ultimately, wanting to die on the ICO hill is a bit odd. I thought it was fairly clear (at least, it was fairly clear to me) that the whole "industry" is mostly powered by hype -- which leads to people being swindled out of their money. Wanting to protect a completely unregulated industry's ability to fool people into wasting their money doesn't seem like a sane or sustainable position (that's how economic crashes happen).
> Keeping me out of Uber's seed round is a violation of my rights.
First of all, this is a story about China. Second of all, it's a story about ICOs and not non-ICO startups. Third of all, is it also a violation of your rights to not be able to fund companies in countries that are at war with your country (which I assume is the US)? Is it a violation of your rights to not be able to fund illegal activity? I'm just trying to gauge at which point does your view on "the inalienable right to invest in anything" stop short? I would expect that China is trying to come to a decision about whether ICOs should be made illegal or more regulated.
Although I read what you wrote and to a large extent agree, I have to say, love the name: RothbardRand (Murry Rothbard was a major figure in Austrian School of economics and modern libertarianism. Ayn Rand a philosopher, and developer of the philosophical framework of Objectivism)
Makes sense why you feel this way.
What I will say, is no one stopped you from investing in Uber, besides Uber. Tomorrow I can go out and sell half my C-Corp to a friend. Legally, no one is stopping me, besides me and my contract(s). My company isn't publically traded, and as such, I haven't released shares to be bought and sold.
That being said, if you're talking about "accredition" - that shouldn't stop you from being able to invest in a friend's or aquantences company. At least until you have 35 of said people..
Which I agree is B.S., at the same time - it's just a way to ensure you don't get massive companies like Uber getting billions of funding and providing no services. It's an attempt at curbing a dot-com-esqu bubble. Overall, I do think this is government over reach, but I do see the point.
There are ways around that FYI, for example there isn't a reason a financial advisor couldn't invest on your behalf.
The problem is that companies doing ICOs aren't Uber.
Peek your head into /r/ethtrader. You will find people putting their retirement savings, mortgaging houses, etc and these people aren't technically savvy and can be easily taken for a ride. While you might have good apples, there are going to be tons of bad apples, people just coming with a white paper and asking for millions of dollars. Coming back to your question, the rich don't need protection as its ok to lose money when you are rich. The 'not rich' need protection as if they lose all their savings, it will seriously harm their lives.
The law you're referring to is more about marketing investments.
You're still free to give your friend 10k for a startup.
It's to prevent boiler room style organizations that quite effectively convince people without much information that an investment is sound when it's not.
The US recently started allowing startups to raise money from non-accredited investors. It's just that most legitimate startups still prefer raising from legitimate investors.
This has left "startups" like this "company" YayYo, which raise money from TV commercials stating that they'll become the next Uber.
1) In the alternate reality where you did invest in AirBnb and Uber, how did you manage to concentrate your investments in those two companies, and reject thousands of contenders who eventually folded down? If you also invested in 10,000 photo-sharing apps and "Yo" clones, what are the total portfolio returns?
2) In that alternate reality, what advantage did your money have over YC, Andreessen Horowitz or Benchmark money? Were you able to connect founders to top government decision makers, or bulk up their growing management team with hard-to-get candidates? If the answer is "yes", you could've been awarded advisory shares in Uber and AirBnb without being a qualified investor (a gift is a gift, after all). But since more likely the answer is "no, my money is no different than money from a joe schmoe down the street", you will likely be required to overpay for a ridiculous valuation at seed stage. What effect would that have on your portfolio as a whole?
We tried libertarianism. It doesn't work. I realize the futility of trying to explain this to someone with the username "rothbardrand" but I used to be a libertarian and I finally broke out of it, so maybe this will give someone else teetering on the edge some things to think about.
1. Libertarianism sweeps negative externalities under the rug. Air quality, noise pollution, the costs to society when an elderly person goes bankrupt. The counter arguments are thin. If you don't ban building in a flood plain, people will build in the flood plain. Then the flood will happen and we'll all be worse off.
2. Libertarianism is inefficient because it demands that people become experts in a wide, wide array of topics in order to be healthy and financially secure. Sometimes becoming an expert in a topic is to experience it. For example, I used to be addicted to nicotine. It's one thing to explain with words how addictive it is, it's another to actually be addicted. By introducing a bit of a nanny state we can use laws and taxes as a kind of cross generational memory and save people from having to learn some of the lessons we had to learn.
3. Libertarianism doesn't address the concept of power. It pits the whole world through the lens of rights when there are other concerns like foreign citizens owning portions of companies critical to our national security or owning large portions of our media.
4. Libertarianism underestimates how much work the state puts towards fighting international crime. We use the financial system to track where mafias hide money and how they organize their money laundering schemes.
The problem with leaving libertarianism is that after years of thinking about everything through the lens of rights and the individual one is left with the question "well, what matters then?" and the answer is difficult, but here is my best shot:
The world is one of consequence. So when think about policies we should be concerned with our ends, but we should choose our ends as if we didn't know who we were in the world beforehand.
So my answer is roughly "consequentialism tempered by individual / human rights".
You don't get to buy into Uber's round because they aren't a public company. If they become a public company they have to open their books. Why? Because widespread fraud happened before this and it wasn't just to little old grandma. Sorry about the violation of your rights, but if I didn't know who I would be beforehand, this is what I think would lead to the best average outcome.
As for the middle class not being able to invest in the best companies, I agree with you that we should change some of our regulations. I agree that the rich are getting richer because not enough companies are going public. Let's fix the regulations that empower investment banks at the expense of the entrepreneurs and potential investors, and while we're at it let's raise taxes on the super rich and close their loopholes.
But at the same time let's acknowledge something else: The middle class and the poor have it best in countries like Sweden or Switzerland or Canada where we have more government not less. Where we have more international cooperation not less. Where we have more "collectivism", more education, more consumer protections, more environmental regulation, more investment into research.
And yes we also have rights too, but they're not these absolute mathematical truths and it doesn't mean we should let a bunch of people skirt fiscal regulation by raising a bunch of money anonymously with ICOs.
I don't understand why you're talking about Uber and regulations, when this is China we're talking about. You seem to be on a completely different subject, because the article says nothing about law, and says its a decision by China's Central Bank.
"Ultimately this stuff keeps grandmas poor."
Again, completely off topic to the post. But, when you talk about 'regulations', you should be making yourself clear, because you're covering massive territory and calling it all 'bad' with that statement, which is certainly not true.
When did you have the opportunity to invest in Uber or AirBnB? I really don't think at any point of time were random accredited investors with 10k able to invest in Uber...
In addition to that book you mentioned, check out “Scandal of Money” by George Gilder (quick read) covering the concept of these sort of regulations as well as the nature of sound money vs extreme “financialism” that has replaced it over the last few decades in developed economies... along with increased regulation essentially separating main street from Wall Street / Silicon Valley.
He describes how a return to sound money through Bitcoin and perhaps a new gold standard, as well as reducing these sorts of regulations you describe would enable a renewed prosperity of the middle class.. for a whole host of reasons worth reading in the book.
I don't understand. To invest in Uber seed round you had to be an accredited investor. That's a pretty low bar in the US. But now, crowdfunding rules have removed this requirement for those raising less than 5 million.
I need to say that you have some great points ;) It's really exciting to read opinion so close to my heart.
Currently, I work at Neufund where we want to do exactly what you described: open access to broad range of investment opportunities for everyone by using cryptocurrencies. Check it out! https://neufund.org/
Does this spell trouble for Ethereum? Without ICOs (one of it's major features if not the most important one) what else will drive the price speculation?
I believe prices are inflated because of ICOs. People are buying tokens counting on ICO hype to increase their value so they can flip their initial invested principal with 2x/3x/4x return.
Without ICOs this speculative technique will not be possible so we will see how many people are actually interested in buying these worthless tokens because they believe in their "features", rather than speculate on their price.
I wonder though if the speculation will just move from China to other countries though and the bubble will continue until there is more action by regulators around the world against this.
It's important to note that ICOs are a mechanism rather than a financial instrument and it's the nature of the underlying financial instrument that generally influences the legality.
For example if it's used as pre-sale (i.e. currency that will be used in product for a future product) then that's likely legal in most places, if it's used as a proxy for equity then it's likely illegal in most countries (most countries prohibit unregulated share offerings to non-sophisticated consumers).
Although in some cases ICOs might get considered as gambling if the purpose is primarily considered to be for speculation rather than whatever the underlying product is.
not a lawyer but be careful, some "products" like a club membership for example, have been ruled as actually securities
in short, any "product" can be a security if there is even a hint of speculative investment activity (and a motivated prosecutor)
really it is less about logic and definitions...this audience wants to parse things and recompile. in law and moreso in regulatory affairs, it is far more about guiding behavior by carrots or sticks to a particular philosophical/moral/politial/economic subjective end goal
Estonia's gov is famous for adapting new things. I still remember their initiative on e-visa. Actually China is trying to do that too. But crypto coins are made to decentralize things, I wonder how these gov-lead coins will play any parts.
To a relative outsider, a lot of the current movement in the crypto-currency space seems to be about amplifying the holdings of those who already hold. The BCC fork, for instance, effectively gave current bitcoin holders an overnight boost in the 15-20% range.
ICOs appear to be a way to finance things in a kickstartetr type way, only with instantly trade-able coins in the form of a new crypto-currency, with buy-in conducted in ether. These provide a new speculation vehicle, often/usually totally divorced from the underlying activity of the company.
Both of these things neatly skip any sort of bootstrapping phase that might be inherent to a new crypto-currency, and serve insiders and the already crypto-wealthy rather than newcomers or those outside the existing bubble. The whole thing seems very tenuous, and speaks very much of an "in-crowd".
> Both of these things neatly skip any sort of bootstrapping phase
So true. That bootstrapping phase has been reduced to dream up a whitepaper and that's basically it. All what comes afterwards to pump the launch is clever marketing (I've seen Google ads, FB ads, celebs on Twitter etc etc). I cannot understand why it is legal to behave like that.
Finally somebody in position of power stepped in to stop this mad online casino. I was not expecting this sensible move from China, was hoping EU or US would lead the way on regulating this crypto fraud. I hope Fed/ECB follow the Chinese Central Bank and ban ICOs too and start regulating crypto and enforcing some basic rules.
I think it is safe to say that this is because it is something the party can't control (in the somewhat more overt sense rather than the regulatory sense).
Protostarr - who hadn't consulted a lawyer at all - shut down and returned the money; BenjaCoin went "actually we're good" and has argued such to the SEC.
The SEC's approach is considerably softer-touch than most people expected - but despite the rantings of crypto paranoiacs, the government is not in fact there to harsh your mellow. Point 3 of the SEC’s mission statement is "facilitate capital formation" - they explicitly see their job as helping you get rich! But of course, point 2 is "maintain fair, orderly, and efficient markets," and point 1 is "protect investors".
Lots of people dislike ICOs, some for good reasons. But ICOs is a general mechanism and the specifics differ. Are some ICOs ponzi schemes? Sure. But this move is about capital controls, little else. I am surprised so many people are defending this as a good thing. Do you want to outlaw all VC money too?
I hold many assets in this space including ETH and NEO. There are tons of scams and money grabs with ICOs. While this announcement has been pretty brutal for me, I think it is ultimately a good thing for the industry as a whole.
I think ICOs can be extremely beneficial for teams to raise money. But a lot of people buying these tokens do not understand what they're getting in return. I'd like to see it become easier to actually own equity or a % of a company's revenue by holding tokens. Hopefully these future regulations will build trust in the ecosystem by minimizing scams and providing clarity. More trust yields more people converting fiat -> crypto... which should yield a healthier less volatile ecosystem.
It probably has a lot more to do with the country regulating its own fiat currency, foreign change and savings quite aggressively. That made any previously unregulated (because new) alternative the _de facto_ change mechanism.
I assume most of the HN readers are from USA and I can't believe my eyes what I'm reading here. People cheering a government's ban on what its citizens can do with their lawfully earned money.
I worked for my money, I paid huge amounts of taxes on them. Why is it ok for somebody to come and tell me what I can and can't do with them, and then telling me it's in my best interest to not be allowed to invest them.
This was a needed move. Too many scamcoins are appearing and selling their overpriced offerings. It's like Kickstarter, but for larger sums of money and less accountability if things don't materialise. We are heading for a pretty serious ICO bubble if ICO's can continue to operate like they are and I can only hope that the USA follows suit next.
The crypto markets right now are in a free fall as a result of the panic. This is a ban on ICO's, not a ban on cryptocurrency. People don't realise how instrumental China is in the crypto world, quite crazy. I am taking this opportunity to buy up promising alt coins like TenX ($pay) which are all incredibly unvervalued right now as a result of the drop.
As we learned with Bitcoin, panic is temporary and eventually things will bounce back. We are entering a brave new world with cryptocoins as they reach the mainstream.
A lot of people seem to suggest that some kind of regulation, or even outright ban, of ICOs is necessary. Apparently in order to prevent people from loosing their money on risky investments?
I don't really understand why it is appropriate for someone else to tell me how to spend my hard earned money? Isn't that what freedom of choice is about? Even if I'm being manipulated into a scam, it is still MY choice.
Let people spend their ICO money the way they spend their votes. Its basically the same form of manipulation anyway.
What about all those legitimate startups that raised money from ICO's???
Here on Hacker News we had a staunch defender of ICO's, who was saying "ICO's of some form are unquestionably the future of raising capital for most tech companies up to a certain size".
>May I ask what the largest/most successful "traditional" tech company that used an ICO is? By "traditional" I mean that their tech has nothing to do with blockchains and they could have also just raised money on angellist, and today are just a normal tech company shipping some kind of a product, like a hoverboard.
>This is early days, very early days. Give it a few years, and people won't bat an eye at raising capital via the blockchain. It's just more efficient and easier. I mean, if you like having to travel around, having tons of meetings and discussions, hoping your lead investor doesn't pull out and fuck up the whole round, by all means keep supporting the current system. It just is going to change, massively, in the coming years. There will be some sort of place for traditional capital but blockchain capital raising will hit every industry.
If you think about it, that response to my question really says it all.
(Upon my folowup, they did name two software companies.)
[+] [-] rothbardrand|8 years ago|reply
Seriously, these securities rules keep people like me from investing in AirBnB and Uber (two that I caught very early and wanted into)... but we can all go to Vegas and lose $100k in a single weekend. But putting $10k into Uber's seed round is somehow a crime I need to be protected from? Truth of the matter is this is the essence of capitalism-- it is my right to invest in Uber's seed round and Uber's right to have me as an investor (if they consent), whether I am "accredited" or not. This is basic "Freedom of association" which underpins everything from gay marriage to the right to refuse service to barefoot people.
Also, of course, I've lost my own $10k on more than one occasions starting companies. (And I've made much more as well.) Why do I need protection from myself? Especially when the terms of that protection are written by people who don't know what SHA256 is.
No, these regulations mainly keep the middle class and the not-quite-wealthy-enough from investing in the highest upside opportunities. I know it's better to put $10k into 10 different seed rounds than $100k into one seed round. I don't need to be accredited to know that.
And I've certainly lost a lot more than that (and made even more) in the stock market using complicated options strategies involving multiple legs and expirations-- I'm the very definition of a sophisticated investor....
.... but I can't be trusted to give a startup $10k?
This is what regulation tends to do, which people don't seem to get -- it raises the bar keeping the little guy out.
Once again, the rich get richer and the poor and middle class have less opportunity.
PS-- To those responding: Yes, I have heard "but what about the grandmas? won't anyone think of the grandmas???" before. I'm acutely aware of the history of this type of regulation in the USA. Ultimately this stuff keeps grandmas poor.
You should all read G. Edward Griffens "The Creature from Jekyll Island". It's a history book about money, but it's not in the least dry.
Government always has an excuse, usually a claim to be helping or protecting people, when it violates our rights.
Keeping me out of Uber's seed round is a violation of my rights.
[+] [-] cyphar|8 years ago|reply
But ultimately, wanting to die on the ICO hill is a bit odd. I thought it was fairly clear (at least, it was fairly clear to me) that the whole "industry" is mostly powered by hype -- which leads to people being swindled out of their money. Wanting to protect a completely unregulated industry's ability to fool people into wasting their money doesn't seem like a sane or sustainable position (that's how economic crashes happen).
> Keeping me out of Uber's seed round is a violation of my rights.
First of all, this is a story about China. Second of all, it's a story about ICOs and not non-ICO startups. Third of all, is it also a violation of your rights to not be able to fund companies in countries that are at war with your country (which I assume is the US)? Is it a violation of your rights to not be able to fund illegal activity? I'm just trying to gauge at which point does your view on "the inalienable right to invest in anything" stop short? I would expect that China is trying to come to a decision about whether ICOs should be made illegal or more regulated.
[+] [-] lettergram|8 years ago|reply
Makes sense why you feel this way.
What I will say, is no one stopped you from investing in Uber, besides Uber. Tomorrow I can go out and sell half my C-Corp to a friend. Legally, no one is stopping me, besides me and my contract(s). My company isn't publically traded, and as such, I haven't released shares to be bought and sold.
That being said, if you're talking about "accredition" - that shouldn't stop you from being able to invest in a friend's or aquantences company. At least until you have 35 of said people..
Which I agree is B.S., at the same time - it's just a way to ensure you don't get massive companies like Uber getting billions of funding and providing no services. It's an attempt at curbing a dot-com-esqu bubble. Overall, I do think this is government over reach, but I do see the point.
There are ways around that FYI, for example there isn't a reason a financial advisor couldn't invest on your behalf.
[+] [-] anilshanbhag|8 years ago|reply
Peek your head into /r/ethtrader. You will find people putting their retirement savings, mortgaging houses, etc and these people aren't technically savvy and can be easily taken for a ride. While you might have good apples, there are going to be tons of bad apples, people just coming with a white paper and asking for millions of dollars. Coming back to your question, the rich don't need protection as its ok to lose money when you are rich. The 'not rich' need protection as if they lose all their savings, it will seriously harm their lives.
[+] [-] octaveguin|8 years ago|reply
You're still free to give your friend 10k for a startup.
It's to prevent boiler room style organizations that quite effectively convince people without much information that an investment is sound when it's not.
[+] [-] airza|8 years ago|reply
It's because of that
[+] [-] tuna-piano|8 years ago|reply
This has left "startups" like this "company" YayYo, which raise money from TV commercials stating that they'll become the next Uber.
http://www.businessinsider.com/yayyo-ipo-ads-tv-ramy-el-batr...
[+] [-] prostoalex|8 years ago|reply
2) In that alternate reality, what advantage did your money have over YC, Andreessen Horowitz or Benchmark money? Were you able to connect founders to top government decision makers, or bulk up their growing management team with hard-to-get candidates? If the answer is "yes", you could've been awarded advisory shares in Uber and AirBnb without being a qualified investor (a gift is a gift, after all). But since more likely the answer is "no, my money is no different than money from a joe schmoe down the street", you will likely be required to overpay for a ridiculous valuation at seed stage. What effect would that have on your portfolio as a whole?
[+] [-] 3pt14159|8 years ago|reply
1. Libertarianism sweeps negative externalities under the rug. Air quality, noise pollution, the costs to society when an elderly person goes bankrupt. The counter arguments are thin. If you don't ban building in a flood plain, people will build in the flood plain. Then the flood will happen and we'll all be worse off.
2. Libertarianism is inefficient because it demands that people become experts in a wide, wide array of topics in order to be healthy and financially secure. Sometimes becoming an expert in a topic is to experience it. For example, I used to be addicted to nicotine. It's one thing to explain with words how addictive it is, it's another to actually be addicted. By introducing a bit of a nanny state we can use laws and taxes as a kind of cross generational memory and save people from having to learn some of the lessons we had to learn.
3. Libertarianism doesn't address the concept of power. It pits the whole world through the lens of rights when there are other concerns like foreign citizens owning portions of companies critical to our national security or owning large portions of our media.
4. Libertarianism underestimates how much work the state puts towards fighting international crime. We use the financial system to track where mafias hide money and how they organize their money laundering schemes.
The problem with leaving libertarianism is that after years of thinking about everything through the lens of rights and the individual one is left with the question "well, what matters then?" and the answer is difficult, but here is my best shot:
The world is one of consequence. So when think about policies we should be concerned with our ends, but we should choose our ends as if we didn't know who we were in the world beforehand.
So my answer is roughly "consequentialism tempered by individual / human rights".
You don't get to buy into Uber's round because they aren't a public company. If they become a public company they have to open their books. Why? Because widespread fraud happened before this and it wasn't just to little old grandma. Sorry about the violation of your rights, but if I didn't know who I would be beforehand, this is what I think would lead to the best average outcome.
As for the middle class not being able to invest in the best companies, I agree with you that we should change some of our regulations. I agree that the rich are getting richer because not enough companies are going public. Let's fix the regulations that empower investment banks at the expense of the entrepreneurs and potential investors, and while we're at it let's raise taxes on the super rich and close their loopholes.
But at the same time let's acknowledge something else: The middle class and the poor have it best in countries like Sweden or Switzerland or Canada where we have more government not less. Where we have more international cooperation not less. Where we have more "collectivism", more education, more consumer protections, more environmental regulation, more investment into research.
And yes we also have rights too, but they're not these absolute mathematical truths and it doesn't mean we should let a bunch of people skirt fiscal regulation by raising a bunch of money anonymously with ICOs.
[+] [-] devwastaken|8 years ago|reply
"Ultimately this stuff keeps grandmas poor."
Again, completely off topic to the post. But, when you talk about 'regulations', you should be making yourself clear, because you're covering massive territory and calling it all 'bad' with that statement, which is certainly not true.
[+] [-] empath75|8 years ago|reply
[+] [-] mcguire|8 years ago|reply
What about Quirky, Homejoy, Zirtual, Secret, Grooveshark, Rdio, Leap, Theranos, Sprig, Beepi, ...
[+] [-] TrevorAustin|8 years ago|reply
[+] [-] JamesBarney|8 years ago|reply
[+] [-] seanmcdirmid|8 years ago|reply
[+] [-] justonepost|8 years ago|reply
[+] [-] flylib|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] PKop|8 years ago|reply
He describes how a return to sound money through Bitcoin and perhaps a new gold standard, as well as reducing these sorts of regulations you describe would enable a renewed prosperity of the middle class.. for a whole host of reasons worth reading in the book.
[+] [-] Mendenhall|8 years ago|reply
Almost any ban can be said to be done to protect people.
Cant have them reading some books for their own good!
[+] [-] matz1|8 years ago|reply
[+] [-] vasilipupkin|8 years ago|reply
[+] [-] krzkaczor|8 years ago|reply
Currently, I work at Neufund where we want to do exactly what you described: open access to broad range of investment opportunities for everyone by using cryptocurrencies. Check it out! https://neufund.org/
[+] [-] richardknop|8 years ago|reply
I believe prices are inflated because of ICOs. People are buying tokens counting on ICO hype to increase their value so they can flip their initial invested principal with 2x/3x/4x return.
Without ICOs this speculative technique will not be possible so we will see how many people are actually interested in buying these worthless tokens because they believe in their "features", rather than speculate on their price.
I wonder though if the speculation will just move from China to other countries though and the bubble will continue until there is more action by regulators around the world against this.
[+] [-] ig1|8 years ago|reply
For example if it's used as pre-sale (i.e. currency that will be used in product for a future product) then that's likely legal in most places, if it's used as a proxy for equity then it's likely illegal in most countries (most countries prohibit unregulated share offerings to non-sophisticated consumers).
Although in some cases ICOs might get considered as gambling if the purpose is primarily considered to be for speculation rather than whatever the underlying product is.
[+] [-] rficcaglia|8 years ago|reply
in short, any "product" can be a security if there is even a hint of speculative investment activity (and a motivated prosecutor)
really it is less about logic and definitions...this audience wants to parse things and recompile. in law and moreso in regulatory affairs, it is far more about guiding behavior by carrots or sticks to a particular philosophical/moral/politial/economic subjective end goal
[+] [-] jcrei|8 years ago|reply
[+] [-] casualwasher|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] billpg|8 years ago|reply
What?
[+] [-] vortico|8 years ago|reply
[deleted]
[+] [-] Nursie|8 years ago|reply
To a relative outsider, a lot of the current movement in the crypto-currency space seems to be about amplifying the holdings of those who already hold. The BCC fork, for instance, effectively gave current bitcoin holders an overnight boost in the 15-20% range.
ICOs appear to be a way to finance things in a kickstartetr type way, only with instantly trade-able coins in the form of a new crypto-currency, with buy-in conducted in ether. These provide a new speculation vehicle, often/usually totally divorced from the underlying activity of the company.
Both of these things neatly skip any sort of bootstrapping phase that might be inherent to a new crypto-currency, and serve insiders and the already crypto-wealthy rather than newcomers or those outside the existing bubble. The whole thing seems very tenuous, and speaks very much of an "in-crowd".
[+] [-] chinathrow|8 years ago|reply
So true. That bootstrapping phase has been reduced to dream up a whitepaper and that's basically it. All what comes afterwards to pump the launch is clever marketing (I've seen Google ads, FB ads, celebs on Twitter etc etc). I cannot understand why it is legal to behave like that.
[+] [-] nickserv|8 years ago|reply
ICO (Initial Crypto-Token Offering) refers to financing through the issuance of encrypted tokens (Crypto-Token).
[+] [-] richardknop|8 years ago|reply
[+] [-] tankenmate|8 years ago|reply
[+] [-] davidgerard|8 years ago|reply
What they've done is very gentle soft-touch stuff. They've been calling ICO promoters and strongly suggesting they get their legal ducks in a row.
https://davidgerard.co.uk/blockchain/2017/09/01/the-sec-told...
Protostarr - who hadn't consulted a lawyer at all - shut down and returned the money; BenjaCoin went "actually we're good" and has argued such to the SEC.
The SEC's approach is considerably softer-touch than most people expected - but despite the rantings of crypto paranoiacs, the government is not in fact there to harsh your mellow. Point 3 of the SEC’s mission statement is "facilitate capital formation" - they explicitly see their job as helping you get rich! But of course, point 2 is "maintain fair, orderly, and efficient markets," and point 1 is "protect investors".
[+] [-] Tepix|8 years ago|reply
I don't see why projects such as "useless etherum token" https://uetoken.com/ should be banned.
You may want to ban trading the token to prevent money laundering but that would apply to all crypto coins.
[+] [-] oskarth|8 years ago|reply
[+] [-] PaulMest|8 years ago|reply
I think ICOs can be extremely beneficial for teams to raise money. But a lot of people buying these tokens do not understand what they're getting in return. I'd like to see it become easier to actually own equity or a % of a company's revenue by holding tokens. Hopefully these future regulations will build trust in the ecosystem by minimizing scams and providing clarity. More trust yields more people converting fiat -> crypto... which should yield a healthier less volatile ecosystem.
[+] [-] doktrin|8 years ago|reply
Case in point, NEO is probably one of the scammiest so-called "crypto" offerings out there
[+] [-] bertil|8 years ago|reply
[+] [-] chvid|8 years ago|reply
[+] [-] tudorconstantin|8 years ago|reply
I worked for my money, I paid huge amounts of taxes on them. Why is it ok for somebody to come and tell me what I can and can't do with them, and then telling me it's in my best interest to not be allowed to invest them.
[+] [-] DigitalSea|8 years ago|reply
The crypto markets right now are in a free fall as a result of the panic. This is a ban on ICO's, not a ban on cryptocurrency. People don't realise how instrumental China is in the crypto world, quite crazy. I am taking this opportunity to buy up promising alt coins like TenX ($pay) which are all incredibly unvervalued right now as a result of the drop.
As we learned with Bitcoin, panic is temporary and eventually things will bounce back. We are entering a brave new world with cryptocoins as they reach the mainstream.
[+] [-] rothbardrand|8 years ago|reply
It's really easy to just say all these ICOs are scams but we have not seen many outright scams.
I have seen a lot of very young enthusiastic teams promising things that it would be very hard for them to deliver on.
And I imagine every Silicon Valley VC can see the same thing about their pitches.
How do you know which are scams and which aren't? There's no objective measure.
So basically this is banning the middle class from investing in the next massive technology cycle.
Reserving it once again only for VCs and accredited investors. Keeping the little guy out and making the rich richer.
[+] [-] return0|8 years ago|reply
> We are entering a brave new world with cryptocoins as they reach the mainstream.
You can't have both. decide
[+] [-] casualwasher|8 years ago|reply
[+] [-] crypt1d|8 years ago|reply
I don't really understand why it is appropriate for someone else to tell me how to spend my hard earned money? Isn't that what freedom of choice is about? Even if I'm being manipulated into a scam, it is still MY choice.
Let people spend their ICO money the way they spend their votes. Its basically the same form of manipulation anyway.
[+] [-] logicallee|8 years ago|reply
Here on Hacker News we had a staunch defender of ICO's, who was saying "ICO's of some form are unquestionably the future of raising capital for most tech companies up to a certain size".
In response to that wide claim, I asked the following question which I'll quote part of: https://news.ycombinator.com/item?id=15121111
>May I ask what the largest/most successful "traditional" tech company that used an ICO is? By "traditional" I mean that their tech has nothing to do with blockchains and they could have also just raised money on angellist, and today are just a normal tech company shipping some kind of a product, like a hoverboard.
Here was their response which I'll quote: https://news.ycombinator.com/item?id=15121451
>This is early days, very early days. Give it a few years, and people won't bat an eye at raising capital via the blockchain. It's just more efficient and easier. I mean, if you like having to travel around, having tons of meetings and discussions, hoping your lead investor doesn't pull out and fuck up the whole round, by all means keep supporting the current system. It just is going to change, massively, in the coming years. There will be some sort of place for traditional capital but blockchain capital raising will hit every industry.
If you think about it, that response to my question really says it all.
(Upon my folowup, they did name two software companies.)