06 May 2019 #Ethereum
ICOs have had a rocky time in the last few years, and the next 12 months could be just as important in the future. A properly run ICO that is devoid of the kind of scammy practices that have plagued the ICO space in the past is fantastic. They have shaken up the three pillars of traditional financing and for a good reason. Those three pillars are venture capital, which has taken the most direct hit, as well as the notion of entrepreneurship and that of public finance.
These three sectors have been shaken, but regulations have brought change to the ICO market itself. Regulators in the US see ICOs as nothing but securities, and this limits their effectiveness. Wile the quality of token issuances have improved due to regulatory burdens; the quality has dramatically fallen.
Tokens as securities do not incentivize companies to embed the token into their business models, but rather force them to use them as sources of funding and nothing else. This is a problem of last generation regulators trying to come to grips with next-generation technology. This generation always suffers from this kind of backward thinking.
There is a little bit of hope though. A commissioner from the SEC stated a while back that if a token or coin comes from a network that is sufficiently decentralized, then that will not be seen as a security by the SEC. This is due the SEC not being able to add any value due to the lack of a centralized actor in the network.
This is only a little bit of hope though since it still means that token from newly started networks will all be put in the same securities box. Currently, only Bitcoin and Ethereum are not classified as securities, while everything else is. Bitcoin Cash, which is seen as a medium of exchange, is not a security by any means but it is still classified as one. Lumens are classed as securities even though they are far from it.
Boxing tokens into securities will just hamper innovation with regards to what startups are able to do with their networks and how they will be able to utilize their coins in their businesses.
The entire premise of blockchain and tokens is that a token is a decentralized utility. It can be anything, it just so happens to be most famous as a "currency." Many look to Bitcoin, or the price of Ethereum, and see the trading potential. That is not what blockchains and token are all about.
It is the regulatory narrow mindedness and lack of vision from market participants that have the potential to kill any innovative uses of token technology. If all startups are forced to go through the SEC so that they are "street legal”, so to speak, they will box themselves in far too much to be of any value to the broader community. The whole point of ICOs was to allow communities to participate not just in the creation of a network, but also in the functioning of the network as a whole. Securities will not allow average consumers to take part in the running of the network as securities are not open to everyone. That is a long road to a bitter future for blockchain technology.
The technology and the SEC will come to a head in 2019. Blockchain is being embraced around the world – from a number of Asian countries to Europe where France has finally come up with regulations that inspire creativity. This means that for the first time in over a century, the US will be lagging behind the rest of the world in this new technology. The next Facebook, Google, Apple or Microsft will not come out of the US – it will come from elsewhere. That is why tokens and securities will come to a head this year. That is why the next 12 months are so important for ICOs.
Author: Ali Raza for Crypto-Rating.com
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