That SEC memo was weak. They should have made much more forceful statement. Thousands (likely tens of thousands) of US citizens are still investing in ICOs, there needs to be much stronger action taken to stop their gambling.
It basically said "we are watching this space" which will frighten anybody who knows that the SEC isn't in a hurry to investigate.
They can get you for things from years past (IIRC 10), so they don't have to rush things.
You know we're talking about the same SEC that didn't saw the real estate bubble coming in 2007/08 (size > trillions, CDOs are obviously fine) or the dotcom bubble in 2000 (size > trillions, they approved the IPOs, right)?
If so, please give me reasons (instead of opinions or references to SEC "authority") as to why the ICOs in a 175 bn market are "dangerous".
The risk is that the teams may way under-estimate how much work it is (And I think that's what's going to cause them to fail)
but they are a lot more ambitious than you are characterizing.
https://davidgerard.co.uk/blockchain/icos-magic-beans-and-bu...
Look up the EOS fine print. They took down the PDF, but I kept a spare:
https://davidgerard.co.uk/blockchain/references/EOS%20Token%...
TODO this evening: write up a blog post on the ICO for (I am not making this up) synthetic rhino horn dick pills.
These days ICOs are cloning the same smart contract template and just making small edits to it.
Most of the time they barely have any other code than just the slightly edited smart contract template and white paper which is also pretty much a copy paste with buzz words relevant to their niche.
And based on that they are raising millions of dollars.
Of course there are couple of exceptions of projects that actually seem to have some tech foundation (like Sia for example) but these are rare. Scam copy cats without any tech are majority of ICOs.
Their reasoning is "we have an idea, let's raise millions of dollars and we will hire bunch of devs to write the software". Mostly founders are non technical "idea people" so I would doubt their ability to even know if their idea is feasible.
Projects which start with strong technical foundations and don't try to raise money to build their tech (putting cart in front of the horse) are the solid ones. Projects which have no tech and raise money first, those are not likely to succeed imho.
For example? What ICO idea is not a previously failed startup? Distributed file storage that's been built a few times and each time turned out to be painfully slow and impractical? An iOS and Android port of the wallet software? Yet another browser?
(https://news.ycombinator.com/item?id=15077117)
You can build an altcoin in basically no time, on-demand using a web frontend. How hard the shell company piece is I have no idea.
It really doesn't take a lot of talent or hard work to launch a coin from your garage these days.
I think that's kinda why people are welcoming this move - there's a lot of trash coins and trash ICOs with no hope of anything ever coming from them, with a relatively low input of time and effort. But because they offer trade-able tokens and some of them might take off, and at least some of them might get a hype-cycle and increase in value whether there's any underlying value or not, and it's all new, shiny, crypto-magic-money...
It's the equivalent of banning startups to protect investors from stupid/malicious founders, which has obvious negative effects on the economy. And with crowdfunding making its way to startup investment, it's not a reach to compare the two.
In other subthreads I am saying why I think the ban on ICOs might be welcomed, even if it could take the good down with the bad. I'm not arguing in any thread for an outright ban on digital currencies.
Evidently it doesn't really though, because we're in a stage where these are magic, and people are investing based on a little bit of hype which becomes self-sustaining.
There are lots of altcoins out there, most with not much value, but slowly trickling along. And there have been lots of ICOs of dubious value.
I obviously don't know what it takes to persuade you, personally, to invest. But it seems not to take much for the crypto-currency world at large to dive in right now.
To give them credit people have made many times their money buying and reselling but it would be idiotic to let this madness continue.
Why? Inevitably the fools will just run out of money.
This "problem" seems to take care of itself.
Then it becomes our problem again.
I'm not sure this is qualitatively different to a ban, really.
Either way, bans or forcing provision for retirement etc, you're taking the position that someone else does know best, and that they need protecting from their own spending behaviour. After that it's just a matter of degree.
But of course I don't accept their underlying argument at all. Just making the point that even if one did, their solution is not optimal.
I also don't really consider it a trade-off - regardless of a social safety net, we ought to be restricting borderline scams. A lot of people aren't very smart, or are only smart in very specific directions. And they don't know they're not that smart. They can be taken in, scammed and fleeced, and this creates a problem not just for them but for lots of others too. This is why we restrict things like pyramid schemes.
As for those not capable of fending for themselves in a free market: maybe it would be a better idea to have a new class of citizen that, after passing a rationality test, is allowed to buy/invest-in whatever they want, while making the rest of the population in some sense wards of the state, with safety guards on their smartphones and PCs, and a state-appointed counseler greenlighting all of their financial transactions, or at least all of the entities they are allowed to transact with.
As for token sales, you can't categorise them all as borderline scams. It depends on the token sale.
Almost all citizens are badly informed and easily taken in by one thing or other. We look after each other in various ways. Civil safety nets and criminal law are part of those.
>> As for token sales, you can't categorise them all as borderline scams. It depends on the token sale.
Indeed, and many of them are without substance, riding the wave of interest in ICO tokens, and are borderline scams. I did not say all are, but enough that regulation in this space is more or less inevitable, and will be warmly welcomed by many.
There are a f*ckton of laws around IPOs and share trading, for good reasons.
Regarding looking out for each other with bans on dangerous goods/services, I have no problem with a voluntary program that people enroll in to be looked after in this manner. We could have a state-backed coop that we voluntarily cede some of our rights to for a predetermined amount of time (e.g. 5 years), and over that timeframe, we are obliged to use the government's software guards on our smartphones/PCs, that prevents us from transacting with entities not on the government's whitelist.
But people should be able to live without those protections if they so choose. Accepting anything otherwise is accepting a servile existence for oneself and everyone else.
Yet without such things we end up with millions in penury, risking starvation, because they never thought they'd be the one to hit hard times.
As for the rest, yes I get that you're a libertarian. I'm not. I understand its appeal, but it's a recipe for literal social darwinism, with those who are poor, unlucky or ill getting to die, free, in the streets.
And even if we could save the poor with such acts, it seems like a very shortsighted approach that can't possibly be sustained over any significant timescale, given it depends on ignoring the will of an entire segment of the population. What kind of society could we possibly hope to create with such an adversarial approach?
There are not enough jobs at the bottom half of the economy for this.
We'd also have hoards of people starving in the street, as humans are not good at long term planning, or risk assessment.
So yeah, I'm all for "moral hazard".
http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?artic...
The context was unsophisticated investors were being exploited without appreciating the risks involved. They thought they were investing when they were essentially gambling and the underlying security was essentially worthless.