RE: Explainer: Value Flows on Steem with SMTs [VIDEO]
I’m all for SMT’s, but I do question your timing of this. Having read a lot on Steemit, there are many people with unanswered questions, myself included:
How do you plan on dealing with the tsunami of shitcoins er,...shittokens that will naturally be released into the wild when Smart Media Tokens go live?
Will the Steem blockchain be able to technically store and house all the new SMT? What kind of megabytes are we talking about?
Considering the image of ICO’s are currently tarnished and undergoing more and more scrutiny by the SEC, (with ICO’s being shutdown), how do you think the SEC will treat Smart Media Tokens?
further questions from @dana-edwards:
“If they are securities then how much risk is it to use the SMT infrastructure? Considering the cost of launching a security can cost in the tens of thousands in terms of compliance fees and then also the technical cost of setting up the SMT it will not be so simple as merely pushing a button.”
From @nanzo-scoop I shared some similar misgivings, mainly dealing with reputation risk.
Four. Why would a top tier organization like the New York Times associate with a barely known Smart Media Token factory, and one which has no clear guidelines for creation? Why would the NYT use the same service that scam artists and small-time websites use? Have you thought through the risks to their reputations? What's the compelling reason for them?
And one word about timing. If you had released this whitepaper after the UI was stellar, communities were established, and also the official mobile app was completed and being used bug-free, I would be more encouraging. The timing of this doesn't seem ideal, but I see this is your main passion, so that's a positive. Also, the white paper is pretty well constructed, so good job on that.
the New York Times seems a far off target. Many smaller businesses will use it because it is available. Will take time to gain acceptance
Yep, nailed it with these questions.
Hey @stellabelle I responded with the following points, on a separate comment below but I believe it has some merit to your question here "The fives points are solid drivers, I just wanted to add that the contract should have lock-in periods as to safe-guard against flips of price that may occur as a result of ICO's. On the legal side, have you guys sorted out any of the legal jurisdiction technicalities that may arise? I believe its important to show from your end, that you are actively trying to regulate on your end...As a way of protecting customers interest that may participate in these ICO's, I am suggesting that the contract have lock-in periods where funds can then be release base on targets being reach....while this may sound technical I believe that the Proof of Brain concept can work here, as the population who participated in the ICO gives the go ahead to release funds base on the progress of the ICO's, this would help with accounting and would protect yourself from regulatory pressure, as funds are gradually release base on investors consensus and happiness of targets being achieved...well I hope my "two cents" make sense and if you need further clarity please let me know"
Steemit really cannot regulate. But they should allow the various companies who use the SMT technology to have the flexibility to follow regulations in doing their launch. This way if the SEC or others react then at least some of the ICOs can be properly launched and we can reduce our risk as investors by not interacting with the ICOs which are improperly launched.
Some ideas are good, but regulatory risk has to be managed and not by Steemit but at least provide the tools so companies and investors can manage these risks.
But I believe the mechanism that currently exist would help its own regulation, tools like "flag" can become instrumental in this process, its a matter of getting the codes right, probably before flag, thorough comment and must be community base rather than individual, that way we can mitigate any potential fallout. The SEC usual act base on information it receives, I believe the current administration are more concern about lifting regulatory burden rather than imposing, once the necessary legal jurisdiction has been established which can be achieved by partnering with crypto in that space it would really help pushing this SMT-ICO a long way...I believe the mention in the post companies like Aragon in a previous comment to you, did you get the chance to read up on the project
I don't really understand what Aragon is. Is it even a company? What exactly is it?
Aragon is a cryptocurrency that seeks to enact legal jurisdiction for cryptocurrency to operate in...basically they are trying to help put the necessary legal framework necessary for cryptocurrency, that why i suggested it...its token is doing quite well, its one of project that's tackling a very important issue
This comment should be on top.
I agree on the ICO issue with it's sketchy perception by SEC, Media, and public in general with the wave of pump and dumps.
@ned Maybe instead of labeling that function of fundraising as an ICO - since it's not really independent "Coin Offering" for a new platform or chain, the name of that function could be evolved away from that idea that they "might" be a form of securities/investment and towards something more positive along the lines of "crowdfunding" and focus it on how SMT can raise funds for projects and communities here on Steemit and the related caused they support in the "real world". *Like a kickstater or indigogo campaign.
A lot of communities/projects create UIA on Bitshares for that very same reason so I think finding a way to bring that terminology and focus to SMTs will be a positive thing to move that function over internally to Steemit.
It's a thin line with the SEC since over time the token value most likely will increase in time.
Or if it's going to be an ICO then put in the infrastructure to allow for a fully legal crowd funding launch to take place via an SMT. Partially legal or push a button to possibly break the law only confuses the situation. Let each issuer determine their own jurisdiction and announce their jurisdiction to investors. Let issuers put forth terms of service agreements and other legal protection mechanisms which investors can click to sign. Let issuers choose which investors to include or exclude from their ICOs so as to reduce their level of risk exposure.
If an issuer in a country where it's legal to crowdfund is trying to avoid SEC problems then all they have to do is put up a legal defense and an exclusion notice telling US investors not to participate. Just exclude US, South Korean and Chinese investors to reduce your risk if you're doing an ICO.
I think it all is going to be critical that the initial ICOs launched via SMTs ARE NOT scams and ARE successful. In addition, revenue sharing could attract positive attention if it's done right. The question is how do you do it right and make sure it's all legal? I suppose US investors will have to be excluded from a lot of this stuff but this is fine if the ICOs are at least successful and then we can buy the tokens later on.
TL;DR: SMTs that are offered by existing companies for accessing or using existing services use are likely safe from SEC regulation.
The Security Act of 1933, which establishes the definition a security, states:
The term ‘‘security’’ means:
any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a ‘‘security’’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
The common theme in these definitions is that people purchase a security with the expectation of a return on their investment.
What complicates or, in our case, protects SMTs from SEC regulation is the fact that SMTs, like Steem tokens, has a utility function, meaning it is needed in order to use Steemit or any other application on the Steem blockchain.
Sources:
How to execute an ICO in the United States - @blockmason
SEC Investigative Report
Disclaimer: Not a lawyer.