RE: Are Most Cryptocurrencies Doomed to Collapse — because they’re “ICO-issued”?

[h0bby1]

I wonder how this works for ico that happen on a token external to the blockchain of which development is paid by the fund rised through the sales of those tokens.

Like eos who made their ico using eth tokens to fund the development of their own blockchain.

The eth token are not supposed to rise based on the value of the tokens on the blockchain.

But its clear those funding are shady, if not scams, and its only a matter of time before regulation start to kick in, and i think it can be expected they paint things with a broad brush, leaving plenty on the bad side of the law.

Comments

[anonymint]

Like eos who made their ico using eth tokens to fund the development of their own blockchain.

It appears “EOS Tokens” are a half-baked attempt to be an example of the “shares” I refer to in the “Pre-mine Without Securitization” section of my blog:

But if the developer needs funding early and can’t wait, I suggest a non-profit corporation could be constituted with shares issued in exchange for investment. The shares (not the eventually pre-mined tokens) are investment securities …

The “EOS Tokens” are issued to those who invest ETH. Thus, it’s an investment security.

And some claim it is a scam.

In their purchase agreement, they distinguish the (eventually pre-mined) “EOS Platform” tokens from the “EOS Tokens”:

NOT A PURCHASE OF EOS PLATFORM TOKENS. EOS Tokens purchased under this Agreement are not tokens on the EOS Platform. Buyer acknowledges, understands and agrees that Buyer should not expect and there is no guarantee or representation made by Company that Buyer will receive any other product, service, rights, attributes, functionalities, features or assets of any kind whatsoever, including, without limitation, any cryptographic tokens or digital assets now or in the future whether through receipt, exchange, conversion, redemption or otherwise.

Note that afaics the above purchase agreement guarantees no distribution of dividends to EOS Token investors, from selling EOS Platform tokens. So I have no idea why investors are investing. The section of my blog proposes how to achieve such distributions providing an incentive to investors, without causing the platform tokens to become investment securities.

Note that purchase agreement erroneously claims that since the EOS Tokens have no utility, then they’re not investment securities. Which is incorrect, because there is still an expectation-of-profit based on apparently greater fool theory which depends on the ongoing managerial efforts of the EOS Token issuers:

No Purpose. As mentioned above, the EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied. Although EOS Tokens may be tradable, they are not an investment, currency, security, commodity, a swap on a currency, security or commodity or any other kind of financial instrument.

We can see they want to simultaneously imply but also deny that EOS Tokens will be convertible to EOS Platform tokens! Daniel Larimer is a lunatic! In any case, this clearly makes EOS Platform tokens investment securities in any future convertibility (because the Howey Test ignores all obfuscations and looks at the economic reality!):

a blockchain will ever be launched with or without changes to the EOS.IO Software and with or without a distribution matching the fixed, non-transferable EOS Token balances

[h0bby1]

Note that afaics the above purchase agreement guarantees no distribution of dividends to EOS Token investors, from selling EOS Platform tokens. So I have no idea why investors are investing. The section of my blog proposes how to achieve such distributions providing an incentive to investors, without causing the platform tokens to become investment securities.

Yes i wonder the same thing with this form of fund rising based just on buying a token on eth.

Maybe investors have other interest in the development of eos ..

[alexpmorris]

I don't think those behind EOS would disagree with you from a U.S. legal perspective, because they are clearly deterring U.S. citizens from acquiring the tokens, although I do find it intriguing how the U.S. has the power to bend the rest of the world to its whims (FATCA perhaps being one of the best examples of this, as you mentioned elsewhere):

It was decided that U.S. citizens, residents and entities should be excluded from purchasing EOS Tokens in the token distribution because of some of the logistical challenges associated with differing regulations in the many states of the United States of America.

Link: Upcoming EOS Token Distribution - US Citizen Restriction - and Other NOOB Questions

Of course, as what happened with Armstrong (and more recently, Martin Shkreli), if you're in the U.S. (or with most govt's for that matter) and they want to target you for something, they can easily come up dozens of reasons to do so.

[wekkel]

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[bondy007]

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[alexpmorris]

ironically, however, this just came out today as well...

Chinese regulators have today taken the unprecedented move of banning all ICOs. This follows news last week that authorities intended to implement stricter regulations to protect investors from fraud.

• Organizations and individuals must not raise funds through ICO activities.
• Fundraising platforms must not provide trading and exchange services.
• Banks and financial institutions must not do any business related to ICO trading.
• Organisations and individuals who have completed funding through an ICO should make arrangements to repay investors.

Link: IC-NO! CHINA BURSTS INITIAL COIN OFFERING BUBBLE

[anonymint]

UPDATE: the collapse was imminent and has now begun as China has declared ICOs illegal and all funds raised thus far must be refunded, with the SEC expected to follow!

As well South Korea and Russia also announced enforcement against ICOs.

[fourflames]

Will this ban be temporary until legislation and oversight are in place or is this the final nail to the coffin?

[anonymint]

Please read my latest thoughts which are more balanced.

In my reasoned guess/opinion, it is likely the nail in coffin for most of those Xerox copy ICOs created on Ethereum recently. They will have to refund the money. Even the SEC had that policy of leniency of prosecution of the issuers if raised funds are refunded. And reissue in a way that either 1) creates a registered investment security as the token which means the tokens can only be spent on a centralized, regulated exchange; or 2) use a different investment structure as I proposed in my blog in the section “Pre-mine Without Securitization”.

I think other purely ICOs issues such as NEO and Qtum may be forced to reissue and restructure, or maybe not. It is very complicated because global securities regulation appears to be muddled (although note IANAL).

Some people will lose money. Refunding is a mark-to-market event, because if the raised money was already spent on hookers and cocaine, then the investors loose because the tokens will likely be declared illegal on exchanges all over the world.