Opening Remarks at the Securities Regulation Institute

https://www.sec.gov/news/speech/speech-clayton-012218

by thisisit • 9 years ago

144 119 9 years ago

benwilber0• 9 years ago

Before I move on to the next topic I want to raise one more narrow, distributed ledger or "blockchain"-related legal issue by means of a hypothetical. I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like "Blockchain-R-Us," and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved. The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.

xur17• 9 years ago

And there is at least one company that has done exactly this [0].

[0] https://www.vanityfair.com/news/2017/12/iced-tea-company-cha...

ceejayoz3• 9 years ago

At least two (and this one's probably more egregious, in the SEC's eyes): https://www.theverge.com/2018/1/9/16869998/kodak-kodakcoin-b...

PeterisP• 9 years ago

The key part of that comment is "without providing adequate disclosure" - it is acceptable for a public company to do everything listed above as long as the change in business model and the change in risk profile is properly disclosed; as long as what they're advertising (we're now working on a new super cryptoproduct!!!) to potential investors is actually true, and the shareholders (both current and future) are on board with what their company is doing.

elmar2• 9 years ago

For context let´s get into the Bitcoin "Slang" including "pump and dump".

7 Popular Bitcoin and Cryptocurrency "Slang" Terms via CNBC [1:35 duration]

https://www.youtube.com/watch?v=bbhesgGZw2A

ohazi• 9 years ago

Poor Kodak can't seem to get a break...

kevin_thibedeau• 9 years ago

This just isn't their moment.

deckarep• 9 years ago

Isn’t the whole point of crypto-based currencies is to develop a system that has no need to be regulated by a government agency or any single entity at all? If this is about protecting the consumer, perhaps the consumer shouldn’t be meddling in a space that is still being developed where there are big risk factors at this point in time. Or maybe I just dont get it.

dmd• 9 years ago

You can't just unilaterally decide that laws don't apply to you.

atwebb• 9 years ago

Uber and AirBnb seemed to make out alright in the end (or middle as it may be).

tzahola• 9 years ago

I can, if said laws cannot be enforced. Thaf’s the whole premise of cryptocurrencies. Not that they don’t need to be regulated, but that they cannot be regulated.

pathseeker• 9 years ago

There is a difference between what the crypto community needs vs what the government thinks it needs. One of the goals of crypto is lack of regulation like you identified, but that doesn't mean the government doesn't want to regulate it any less.

There are all sorts of industries that would be ecstatic if avoiding regulation was as simple as opting out.

0003• 9 years ago

If you are a public company, then you signed up for SEC regulation...

JumpCrisscross5• 9 years ago

If you are a public company, then you signed up for SEC regulation

If you are under American jurisdiction, you signed up for SEC regulation. Private American companies, offshore companies selling securities to Americans and perhaps even foreign overseas individuals transacting for securities in U.S. dollars are each, to varying degrees, under U.S. jurisdiction.

kinkrtyavimoodh• 9 years ago

You are free to develop your own crypto-currency and do whatever but this isn't about that.

What the chairman is talking about are publicly traded companies suddenly turning to claiming blockchain-based pivots without substantial evidence to believe that they are being sincere and truthful.

This is almost a pump-and-dump scheme in just slightly different clothing.

nxsynonym• 9 years ago

There's no almost about it. It is blatant manipulation.

simias• 9 years ago

Saying "this has no need to be regulated by a government" doesn't magically make it true.

TeMPOraL• 9 years ago

If this is about protecting the consumer, perhaps the consumer shouldn’t be meddling in a space that is still being developed where there are big risk factors at this point in time. Or maybe I just dont get it.

You assume consumers don't have needs and are immune to incentives, and also that people running the coins are perfectly honest, and it would never cross their mind to architect incentives in such a way, as to predictably exploit those consumers.

Also, what 'dmd wrote.

chx• 9 years ago

This is the end of an excellent tweetstorm by Sarah Jeong (so you can feed it into Spooler and read it as a single blog post) https://twitter.com/sarahjeong/status/953713433530089472 but I would like to quote one:

All of this has gone too far!!!!! It was fine when you paranoid dorks were out there scamming each other, please leave the normies alone!!!!!!!!!!!

I also copied this all into https://pastebin.com/e8vXE5Vi

This is what the SEC is saying too with different words.

StavrosK4• 9 years ago

What a disrespectful tweet. If this were about a minority group, there'd be outrage.

reaperducer5• 9 years ago

15 exclamation points. She must be right.

DoreenMichele10• 9 years ago

I would be vastly more interested in hearing her explain what blockchain really is so I can decide for myself if her outrage is appropriate than hearing about how she has to hide her internet activity from her boyfriend and how she is "in trouble" for not coming to bed like she said she would. Her personal comments on those things make her sound like a lunatic with a lot of personal problems, including both zero self control and a dysfunctional private life. This does not inspire confidence in me that I should just listen to her wisdom and do as she tells me to do.

282883392• 9 years ago

She is purporting that bitcoin is somehow "worthless?" and that all of Crypto would crash if people truly understood it. The Chairman's post is simply about being responsible about blockchain and the hype surrounding it at this point.

trhway3• 9 years ago

It was fine when you paranoid dorks were out there scamming each other, please leave the normies alone!!!!!!!!!!!

paranoid dorks are eating the world. Typical for a paradigm shift situation, the old world can only produce gasps of exclamation.

mywittyname3• 9 years ago

perhaps the consumer shouldn’t be meddling in a space that is still being developed

And perhaps companies shouldn't look like they are defrauding investors when there are big risk factors involved.

pintxo• 9 years ago

But this is neither about crypto-based currencies nor it it (really) about the block-chain. It is about fraud, the SECs comment is a warning to publicly traded companies who consider to increase their stock valuation by claiming to work on stuff which (other) people (falsely?) believe to be a game changer while they are not (really) working on it or there is no reason to believe they could actually pull it off.

reaperducer5• 9 years ago

perhaps the consumer shouldn’t be meddling in a space that is still being developed where there are big risk factors at this point in time.

The issue isn't consumers meddling in blockchain currency. It's about consumers being dragged into blockchain speculation without their knowledge.

Grandma puts her retirement savings into some big, safe company. The suddenly the company goes from being an electric utility to being a blockchain speculator and goes bankrupt, wiping out her savings without her even having a chance to get out.

perl4ever7• 8 years ago

Vanguard is supposedly getting into blockchain technology to manage the indexes for their funds...[1]

I have seriously wondered whether I should consider avoiding them. Not just because blockchain=bad, but because I was thinking about how their commitment to minimizing costs could backfire someday, if not immediately.

[1] https://www.reuters.com/article/us-vanguard-group-blockchain...

sova2• 9 years ago

Regulation is typically unhelpful to the market, as it incurs unfair overhead. Blockchain based things can work in a decentralized way relying entirely on the protocol. Still, a blockchain without a community or developer group tweaking the protocol as time goes on is not a tenable solution. There is still a guiding hand but it is very slight, very gentle, and only used to keep things on course.

yohann305• 9 years ago

i was a bit too young to observe but has anyone here seen something similar when the internet craze came out?

1) Were public companies changing their names to reflect the "e"/"i"? If so which ones?

2) Isn't the "i" from iPhone/iMac taken from the word "internet"? Okay it's a product and not a company name, but where does the distinction starts/ends?

Could we expect an incoming "bPhone" (blockchain) or cPhone(crypto), dPhone(decentralized) .. it actually sounds cool, right?

erikpukinskis2• 9 years ago

I doubt we’ll see a mass market blockchain phone for two reasons:

1) blockchain adds overhead. Mobile is about efficiency

2) blockchains are only necessary for adversarial collaboration. Your phone is wholly owned and controlled by you, so there’s no need to host adversarial realities on it.

TomK322• 9 years ago

ad 1) with a lot of people having more than one device, why not a block-chain app between just your devices to make sure information is shared between them correctly? It's all about finding a valid use-case, barely anyone does though.

vernon99• 9 years ago

1) Light blockchain clients? 2) Umm really? Controlled by you? Not by Apple and Google who censor software (crypto as well) and such?

A bunch of companies are doing exactly that right now (can’t recall from the top of my head) and I honestly wish them all the best as the current walled garden situation is obscene.

wmf• 9 years ago

The whole point of buzzwords is that you don't actually do what you're saying. So the ChainPhone wouldn't use a blockchain at all.

matwood• 9 years ago

i was a bit too young to observe but has anyone here seen something similar when the internet craze came out?

Some, but because the money flowed differently it was more common to take successful business idea and start a new VC backed company with successful business + internet tacked on.

Existing companies were naming products with e/i, but again they got nothing close to the boost we are seeing right now with blockchain.

psyc• 9 years ago

I was working then. As I recall, a lot of small companies did this. I can think of one public company that changed the name of a division, but not the whole company. I can't think of any public companies that recast themselves as internet companies this way; perhaps someone else can.

ashelmire• 9 years ago

Companies were adding ".com" to their names all over the place. A lot changed back.

https://www.wsj.com/articles/SB1040163285667930633

kitsune_2• 9 years ago

During the dot-com bubble you had a lot of companies that adopted 'digital super highway' company names.

Some examples:

https://en.wikipedia.org/wiki/E.Digital_Corporation Norris Communications > E.Digital_Corporation

https://en.wikipedia.org/wiki/Broadcast.com Cameron Audio Networks > Broadcast.com

On top of that everyone and their mother founded companies that did 'something with the internet' and all those companies had a '.com', 'e' or something similar in their names.

Personally, I feel like the 'i' was mainly popularised with the iPod.

TylerE• 9 years ago

The original gumdrop iMac's predated the iPod by 3 years and were EVERYWHERE.

reaperducer5• 9 years ago

I remember people saying "Only eMachines can do the internet. That's why they have 'e' in their name, duh!"

And remember "Dot Com Guy?" Some dude in Dallas who as a publicity stunt pledged to stay in his house for an entire year and just live off of stuff ordered online? Today, that's quaint. Back then the very notion of ordering a pizza on your computer was like flying cars.

tialaramex• 9 years ago

Yes, during the dotcom boom you could see a spectrum of behaviour, including at one edge companies that were almost purely a scam, basically "We're going to do this perfectly ordinary business, but _Internet_ so give us piles of cash" and at the other conventional businesses that really were heavily Internet related and only tweaked how they described their existing Internet work or moved that to the top of a document, such as Microsoft or Google.

In the middle somewhere a good example is Be Incorporated. During the 1990s Jean-Louis Gassee had founded this startup with VC money to pursue a new operating system and basically prove Apple (who he'd previously worked for) wrong. By the end of the century JLG's funding was running out, the VCs didn't want any more risk, Apple had chosen to take back Steve Jobs instead of him, and it looked as though Be would go out of business shortly, but the dotcom book offered a "Hail Mary" play.

Be re-wrote its history and produced IPO paperwork that emphasised this as an Internet technology offering in the heart of the dotcom boom. Be's future was now in the promising (but it turns out in the end, totally irrelevant and now forgotten) Internet Appliance market, they pivoted from their previous work (developing a personal computer operating system nobody was using), they went from talking about TCP/IP as a specialist corner case few users would care about to prioritising it as the main focus of their system, and so on.

It didn't work, Be Inc. ceased business after burning all the IPO cash and laid off all its employees without shipping any significant new products. But without the dotcom boom, that would all have happened much earlier, when the VC money ran out. Ordinary people who foolishly purchased Be Inc. shares in the IPO or shortly afterwards lost their shirts, and the VCs got their money back.

stryk2• 9 years ago

So they (Be, inc) passed the buck onto the general public, and let them shoulder the immense financial burden of their failures? That's pretty evil, extremely devious, a whole lot cowardly, and an astonishingly good move business-wise.

marshray• 9 years ago

people who foolishly purchased Be Inc. shares

I disagree with your use of the term 'foolish' in hindsight.

We can imagine an entirely reasonable alternate universe where, by pursuing this 'Internet Appliance' idea, they ended up inventing the formula for what in our universe became the iPad. Apple's success was far from guaranteed at this time too.

gumby• 9 years ago

has anyone here seen something similar when the internet craze came out?...Were public companies changing their names to reflect the "e"/"i"? If so which ones?

This is an age-old phenomenon. Why do you think there's a toy wagon called the "radio flyer"? Radio was the high tech product of its era, and planes...wow!

bob_theslob646• 9 years ago

There definitely is a difference between talk and action.

Will be interesting to see if they actually do anything because in the end it will end up with a ton of litigation that they may or may not want to do.

maxxxxx• 9 years ago

What does it mean when a company pivots to blockchain? Does their business change fundamentally? Maybe I don't understand blockchain well enough but it seems more like an implementation detail to, not a fundamental change.

paulie_a3• 9 years ago

It means they talked to their marketing department to make their advertising more "blockchainy"

kgwgk2• 9 years ago

I don’t remember what the original title of the submission was, but it was orders of magnitude better than the current one.

chaostheory• 9 years ago

"SEC Chief says looking closely at public companies pivoting to Blockchain"

hal9000xp• 9 years ago

SEC completely fails to acknowledge that their regulatory burden is way too heavy for small blockchain startups.

If you want to be fully complaint with SEC to issue your tokens as a security you have to spend shitload of money on laywers and wait for approval for months if not years. In fast-paced world of blockchain, it's equal to suicide.

Another thing is deeply discriminatory concept of accredited investor. They said that it's to protect investors. In reality it means that most lucrative deals will be out of reach for not wealthy individuals. And I hate whole concept that the big brother prevents me for taking risks because they think I'm too stupid for thinking for myself.

And constantly referring to ICO scams is not excuse at all. They don't want to shutdown scammy ICO, then want to shutdown all ICOs including ones with exceptionally brilliant ideas.

SEC is not friendly at all and they don't want to adapt. If they were friendly and willing to provide lightweight regulatory framework for ICO and cryptocurrencies, they would be very welcomed by many in blockchain world.

paulie_a3• 9 years ago

Yes they want to shutdown scams, ie ICOs

trhway3• 9 years ago

old slogan for new times - we're the block in the blockchain.

Animats• 9 years ago

The SEC is being clear enough. "Take the money and run" is not an acceptable business plan. Doesn't matter if it's "crypto". Doesn't matter if it's "blockchain". Doesn't matter if it's "binary options".

This isn't a new thing. Previous generations of scams included "street railways", "real estate investment trusts", and "multi-level marketing". Read "Extraordinary Popular Delusions and the Madness of Crowds", which is over a century old yet will sound very familiar to anyone who's followed ICOs.

The history of scams should be taught in school. At least read the Wikipedia entry.[1] High school students should learn about small cons like the pigeon drop up through big ones like Madoff.

The SEC is mostly reactive. After the thing tanks and people complain, they go after people who acted like crooks.

[1] https://en.wikipedia.org/wiki/List_of_confidence_tricks

perl4ever7• 8 years ago

Real estate investment trusts (REITs) are a perfectly mainstream category of publicly traded investment products today.[1]

And multi-level marketing companies, while they tend to be controversial[2], also include quite a few large publicly traded stocks.

[1] https://www.investor.gov/introduction-investing/basics/inves...

[2] See the feud between Carl Icahn and Bill Ackman over Herbalife and whether it is a scam.

Opening Remarks at the Securities Regulation Institute

Related Stories