Coinbase Can Now List Securities, But is Legal Discrimination Against the Middle Class Justified? – Trustnodes

Coinbase Can Now List Securities, But is Legal Discrimination Against the Middle Class Justified?


Communism doesn’t work. We’ve tried it, it failed. People need incentive to work and to take risk. If an entrepreneur for example sees an inefficiency somewhere, yet he has little incentive to address it, then why should he bother to spend 14 hours a day on addressing that problem?

The answer in capitalism is because he might make a lot of money or he might make the same amount of money while doing something he loves that doesn’t quite “feel” like a job.

In short, there is an incentive to solve problems, ranging from boredom through entertainment, to conquering Mars if Musk can focus.

Starting your own business, however, is probably the riskiest thing one can do, especially if one already has a nice job that pays the bills and nothing else.

Yet the rewards can be immense, both in money and in meaning. So much so that we hail entrepreneurs. After scientists, and in some cases even before them, it is entrepreneurs we look up to, the go getters, the world makers, who’ve given us so many fine things.

Yet, as with much else, there is another side to it. We despise monopolies. Bloated, bureaucratic, dismissive, and often very abusive.

To keep that balance, there needs to be a better way to marry savings with risk takers. Currently, it is done through an intermediary, primarily banks, but banks are effectively a monopoly.

It is because banks are not quite doing a good job that an entire industry has risen to match savings with risk takings: Venture Capitalists.

VCs, however, do not quite have you or me in mind, but solely their own pockets. Especially in Silicon Valley, their target is to create monopolies. Coinbase itself might be a prime example now that it has begun moving into every area, including tokenized securities, but there are more established examples, such as Google and Facebook.

All three begun their life by a small investment from a rich billionaire. Then as they grew, other billionaires or rich people invested more. Once all the up-growth potential was taken, they had an Initial Public Offering and opened to the public.

If we look at bitcoin or ethereum, it seems very much mindboggling how they’ve seen 100x or even 1,000x, but actually that isn’t very rare. To the contrary, it is relatively common.

The initial investors in Facebook, for example, likewise saw 100x or 1,000x returns. However, while anyone could and still can buy bitcoin or eth, only the very rich could initially invest in Facebook or can currently invest in Coinbase.

That is because by law it is illegal for a non-rich person to invest in a start-up. Now, the Securities and Exchanges Commission (SEC) has said it is illegal for the middle class to invest in token offerings.

That means if a smart coder wants to raise some money for a very innovative project, he or she has to go beg billionaires, who if they do invest, may see 100x or 1,000x. You and me, on the other hand, can only watch on the sidelines as others get rich.

SEC says the very rich men who wrote and passed the Securities Act 1933 were smart. The justification for this law goes something like: unless you are very rich, you can not afford the loss, so we’ll prohibit you from investing.

You are of course entirely free to buy millions of state backed lotto tickets until you go bankrupt or to gamble on roulette, but not to fund entrepreneurs.

It is due to this prohibition that many of the ills in our society arise. The gap between the rich and the middle class continues to increase because the rich can invest in promising projects, the rest can not. Wages have stagnated because one doesn’t easily have the choice of starting their own company, unless they are rich. Monopolies continue to be formed from which the rich benefit because competition can not easily enter as the people can not fund it.

Thus a new aristocracy arises, where instead of land feudalism we now have wage feudalism for just a handful of companies probably produce all we consume under different brands.

The incredible economic growth we have seen in the past century thus barely makes its way to the people who then revolt through the ballot box.

Some, of course, trickles down, but the middle class simply has no way of participating in the value creation process for Congress has prohibited them from doing so a century ago when communism was hot and untried.

And this is a communist law. It interferes with property rights and it interferes with voluntary contractual arrangements under no reasonable justification for the government has no right to prohibit us from spending our own money on a perfectly legal endeavor such as entrepreneurship.

Of course, where there is fraud action should be taken, where there is theft, where there is a crime, but a blanket prohibition that discriminates against all in favor of the rich is inequitable.

It is shutting the door in front of our faces, with this law being on par with those laws that discriminated against women, or based on color, or against those of different sexual orientations.

For it is the state meddling where it shouldn’t and where it has no business. Handling out permission slips after months long processes that necessities VC funding, thus shutting the door to the middle class which can’t participate in 100x or 1000x gains.

Of course, most such entrepreneurial activities have negative gains, but they are not only equalized but amount to insignificance in a diversified portfolio where even one investment has 100x gains.

Are we thus to believe that in a nation where 50% have gone to university, the middle class is so utterly stupid that it does not understand risk? Are we to believe that wise grandma who has seen so much doesn’t know she could lose her funds and she is better off in a savings account? Are we to really believe that this blanket discrimination is for our own good when there are many ways such law can be designed in a far fairer manner? And are we really to believe those smart rich men in 1933 were smart for us, or for themselves?

For this is afterall a law written by the rich, and it is a law that benefits only the rich. They must have been incensed at the opening of the value creation process to the people through ICOs, so probably went knocking to the government to keep the doors locked.

Now they want us to accept that our tokens are literally stocks, where the rich get all the gains, and cash out on us all. So keeping the same bloated structure that has served the rich very well and the rest not at all.

Look at Facebook. Would it really behave the way it does had it been the people that initially funded it? Would it also really have seen no competition, considering the many problems with it, had the people been free to invest?

Why is Silicon Valley not funding a Coinbase competitor? Because they’ve all invested in Coinbase? A limited pool of funding afterall does mean limited or no competition.

Thus we face all these problems because the government is effectively saying the most highly educated generation in history is very much stupid. Yet the stupidity here is their belief that anyone buys their justifications to close the door on the many, while themselves they become richer and richer.

Then they wonder why the people revolt through the ballot box, but even there Trump said he’d get rid of these sort of laws, yet he hasn’t. Which means in this globalized world, other jurisdictions are the only real answer for this prohibition is shameful.



Comments (2)

  1. Meh, a very American point of view, but I guess the topic is pretty americacentric anyhow. Indeed the rich don’t want middle class competition, the middle class are where they harvest from normally. Best get your crypto where you can and ICOs as well, the world is currently leaving the US middle class behind as we embrace this revolution.

  2. Communism has failed but so did the NeoFeudal form of capitalism in 2008/09. This was pretty clear when Banks started to dominate the markets back in 04 and shills and fraudsters pumped housing securities. Currently the capital markets are propped up by the state and the taxpayer in a reverse form of socialism where the poor prop up the wealthy.

    “People need incentive to work and to take risk.”

    While some do others don’t. Passion drives some people and others community spirit. To view the world as a reflection of yourself is rather naive. People come in every shape and size. If you try to make sense of the world by reflecting your idea on others you limit the size of the world to the distance the tips of your fingers can reach.

    There is no one ring to rule them all. It is a fantasy.

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