The Securities and Exchanges Commission (SEC) has decided to engage in some propaganda against its own citizens by in effect ridiculing ICOs under the guise of educating.
The website named after the Howey test to determine what is an investment contract, designed and produced by SEC, has such gems as:
“The vast majority of these business and vacation transactions require processing, centralized currency and, most importantly, nickel and dime fees that add up to literally billions.”
Nickel and dime. They’ve even bothered to write a full whitepaper which goes on to lecture about how fiat money is created. Now this is a parody or a mock ICO, of course, but it’s by the SEC, so they tell us:
“The current system is underpinned by a national government and a central bank legally requiring your use of legal tender to pay for goods and services.”
How SEC defines legally we do not know, but they are wrong on two counts. Firstly, Article 1 section 10 of the US constitution, which still stands, says:
“No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”
Even if we ignore the constitution as the administration has on this very point, according to their own accepted law digital representations of money, that being the amounts you hold in a bank account, are not legal tender. Only physical cash is legal tender.
Then they go on to try and tell us how money is produced in US, but much of it either overlooks the explanation given by central banks, or contradicts it.
If SEC really wanted to educate the public they could have showcased actual fraudulent ICOs, rather than themselves pretending to be fraudsters and in the end only showing what looks like propaganda.
In their explaining page they say the site is “an educational tool to alert investors to possible fraud involving digital assets like crypto-currencies and coin offerings.”
Yet what educating part here needs an entire website is unclear. Jay Clayton, the former banker’s lawyer now chairman of the SEC, says:
“We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with many of the classic warning signs of fraud.
Distributed ledger technology can add efficiency to the capital raising process, but promoters and issuers need to make sure they follow the securities laws.”
In short they are saying all ICOs are scams unless they are registered with the SEC. That’s before any court ruling, that’s despite state legislation passed to exclude ICOs from securities registration, and that’s despite SEC and CFTC having a little bit of a scuffle over who should have jurisdiction over what.
Instead of speaking to the public and addressing the many matters, SEC thus has gone into what appears to be political campaigning to presumably persuade the elders in congress that SEC should be given more money so that they can expand their jurisdiction to a global, fast moving, and very innovative space.
That it is a former banker’s lawyer running the SEC is the irony of our ages. Yet no one is surprised when the kleptocratic system is so clearly displayed.
Clayton needs to resign. He has over-reached and thus has weakened the SEC. For whoever thought this website was a good idea (rather than showing actual examples) obviously doesn’t know how to read because the only reading can be that SEC is trying to portray strength, which means they are weak.
It is that weakness France is now trying to exploit. Suddenly their Finance Minister is now passionate about cryptos and blockchains.
What government wouldn’t be passionate about billions of investment in a growing industry with flourishing innovation?
Obviously not the one that has one of their main regulating agency run by bankers. As SEC knows, but obviously wouldn’t explain in that paper where they try to tell us how money is created, one of the main ways banks make profit is through interest charged on money created from nothing when they make loans.
If entrepreneurs need not pay their 20% nickel and dime loan interest charges, or need not give those banks 49% of their start-up’s equity under privileged accredited investors discriminatory status, but instead can directly tap onto savings, then you’d think those shining towers would become a bit less shiny.
Now there is obviously fraud, and there are scams, plenty of them in the banking system especially now that they have a buddy in charge of their overseeing regulator, but the way to deal with scams or fraud is not to shut the gate to everyone.
Not that SEC can. Plenty of other jurisdictions are happy to welcome new ways of value creation and thus economic growth. Congress too will sooner or later have a say, and the blockchain constituency might even show its political muscles during the mid-term elections or during the 2020 elections.
In the meantime, however, Clayton in our view has lost the trust of this industry. The way their DAO finding was announced, without prior public consultation, leaves much to be desired.
Their going after harmless food-apps that want to raise merely $10 million to tokenize ratings, too. Their lack of clarity over what exactly is a utility token, their lack of clarifying when crowdfunding exceptions may apply, this parody website, and the list goes on.
Trump, fire Clayton. You promised this space lower regulations not chaining of innovation.