Frankfurt am Main (AFP) - German Finance Minister Olaf Scholz said in an interview for publication Sunday he backed a global minimum fiscal regime for multinationals as Europe looks to levy tax notably on US tech giants.

"We need a minumum tax rate valid globally which no state can get out of (applying)," Scholz, a social democrat in conservative Chancellor Angela Merkel's coalition government, told the "Welt am Sonntag" weekly.

Europe is trying to devise a strategy to tax profits from the likes of Google, Amazon, Facebook, Apple and digital platforms such as YouTube and Airbnb which currently manage to keep fiscal exposure to a bare minimum.

Digital platforms "aggravate a problem which we know well from globalisation and which we are trying to counter -- the shifting of profits to fiscally beneficial regions," said Scholz.

Scholz was last week nonetheless reported not to be convinced by a controversial EU proposal to slap a European tax on US tech giants amid worries it may turn out to be both ineffective and protectionist.

France for a year has rallied EU partners to draw up the tax which Paris says is necessary to ensure tech giants pay their way.

Scholz explained he had launched an initiative designed to help states react to so-called fiscal dumping in support of embryonic OECD plans designed to fight tax transparency and cross-border tax evasion.

"We require coordinated mechanisms which prevent the displacement of revenues to tax havens," said Scholz.

The European Commission, the EU's executive arm, has proposed a European tax on "big tech" with susbstantial digital revenue in Europe, based on overall revenue in Europe and not just profits.

But lead opponent Ireland says a growing number of countries are grumbling about hidden problems with the tax, including that it could inadvertently snag European companies.

There is also concern as to what consequences might flow from such a plan at a time against the backdrop of a potential full-blown EU-US trade war.

Berlin worries that cranking up the ante on trade with the United States by launching what Washington could see as an attack on Silicon Valley's corporate giants may threaten German auto exports.

Germany has already shown some opposition to a French plan to tax tech giants three percent of certain forms of revenue including advertising and sale of personal data.

French Finance Minister Bruno Le Maire said Thursday he will in the coming days urge EU members to commit to backing a tax.

A March proposal by the Commission includes introducing a tax as a bridge measure until such time as the OECD can roll out a measure which can be applied globally.

https://www.yahoo.com/news/germany-urges-global-minimum-tax-digital-giants-220405598.html

“Supply chains are notoriously complex and inefficient,” Masters said during her London speech. “This is especially true in the metals and mining industry where many operational and commercial practices remain inefficient and antiquated, leading to critical data omissions, security vulnerabilities, expenses, corruption, and unethical provenance.”

The government has raised the prospect of using so-called decryption laws to simply get a provider to turn over a user’s PIN or password to get access to a target’s encrypted communications.

While much of the debate on the Assistance and Access Bill so far has concentrated on the prospect of encryption being weakened, the Department of Home Affairs indicated today encryption may not even be its primary target.

At a joint parliamentary committee hearing, shadow Attorney-General Mark Dreyfus QC noted the bill contained just one reference to encryption in its 171 pages, preferring instead to use an umbrella term “electronic protection”.

“We’ve purposely not used [the term] encryption in the bill because it’s about the framework and access to the issues that encryption causes,” Home Affairs National Security & Law Enforcement Policy Division first assistant secretary Hamish Hansford said.

“The term is much broader than the narrow encryption. It includes things like passwords which get you through an electronic protection to a level of encryption.”

Hansford was supported by Australia's chief domestic spy, ASIO’s director-general Duncan Lewis.

“One of the big distinctions between electronic protection and encryption is that electronic protection is inclusive of things such as a PIN or password,” Lewis said.

This morning’s hearing featured representations from a large cross-section of federal law enforcement agencies and policymakers.

Systemic weakness

Dreyfus also took the government to task over the lack of definition of what constitutes a “systemic weakness or vulnerability” for the purpose of the legislation.

The bill expressly prohibits a “systemic weakness or vulnerability” from being created to satisfy a law enforcement request or technical notice, but never says exactly what that would be.

It appears the government has no intention of defining it for the purposes of the bill, and representatives offered varying takes on what it might mean.

Department of Home Affairs chief Michael Pezzullo said that “no one’s requiring at the enterprise level when you manufacture a device or when you set up a network, that there’s a general and universal way of flicking a switch and all of a sudden rendering encrypted communications clear.”

ASD’s director-general Mike Burgess defined a systemic weakness as “one which would be available to everyone.”

“It’d be one thing to ask for assistance to get access to something but [another for] the action undertaken to provide that in that targeted case [to] jeopardise the information of other people as a result of that action taken,” he sad. “That’s not being asked.”

Home Affairs’ Hamish Hansford said that the systemic weakness provision was added “due to industry concern” and claimed it had been purposely left undefined.

“The industry we’re talking about is broad so to try and define what a systemic weakness is for every individual company relies on an understanding of what their business structures are,” Hansford said.

“What a systemic weakness might be for Apple or Google might not be for Microsoft.”

Pressed by Dreyfus for clarity, Hansford then confirmed that “systemic weakness or vulnerability” had its “ordinary meaning in English”.

“It’s the ordinary meaning,” he said.

“Is it defined very discreetly in the bill? No, because systemic weakness means very many different things to different companies, and companies wanted in the legislation the express provision about systemic weakness.”

Dreyfus quizzed Home Affairs on examples raised by Apple and Cisco of actions they believe could be permissible through the legislation, such as implanting an eavesdropping capability in a target’s smart home speakers.

The panel of agencies largely declined to rule use cases for the law in or out; Hansford noted he would “have to explore” them more to make a determination.

“The answer depends on the company, how they’re structured and how they use their technology,” he said.

Warrant interplay

The government has copped considerable criticism in recent weeks over the lack of judicial oversight of assistance requests and notices that can be served on technology companies under the bill.

But law enforcement agencies returned fire today, saying they intended to use the new powers to get access to information they already had a warrant for.

“The power and authority has already been vested in the agency to [access the information], but the fact is we can’t exercise that power because of technical blockers,” AFP commissioner Andrew Colvin said.

“If we get a search warrant... I don’t then have to get another warrant once I get to the front door before I open the door.

“At the moment, what some submissions suggest is that’s what we should do, whereas I’m saying we’ve already reached a threshold where a federal court judge or member of the AAT [Administrative Appeals Tribunal] has said that is content that you are authorised to get. This is about how we get to it.”

Home Affairs chief Michael Pezzullo said the decryption bill offered more protections than the physical world.

He said that police with lawful authority to enter a premises could simply “ring an accredited locksmith” to get past any security locks on a door.

“What we’re saying with this legislation is not only do you need the warrant, but you need a notice [to get access to encrypted data],” Pezzullo said.

“It’s a double level of authority. The protections provided in this bill are actually greater than what presently exists in the physical world.”

https://www.itnews.com.au/news/australias-encryption-busting-bill-also-after-pins-passwords-514186

Carbon credit market is a billion dollar industry and applying blockchain will be good for both industry.

I came on this forum to get answers from the people who have already invested in cryptocurrencies or are actually experimented on this subject. My question to all of you is the following: From your point of view, what could be the factors responsible of sentiment on the cryptocurrency market ?

China is, by some distance, the undisputed world leader in bitcoin mining — with Chinese mining pools controlling more than 70% of the bitcoin network's collective hash rate, the measuring unit of the processing power of the bitcoin network.

Many in the bitcoin and cryptocurrency industry have expressed concern about how much control this gives China over bitcoin, with the Beijing-based Bitmain Technologies mining more than half the world’s bitcoins.

Now it appears U.S. president Donald Trump's White House is also worrying about China's bitcoin dominance, with a Ripple Labs executive suggesting the U.S. administration is interested in ripple (XRP) adoption to offset China's bitcoin strength.

"The White House in particular seems to be thinking about what it means to have 80% of bitcoin mining taking place in China and a majority of ether mining taking place in China," Ripple Lab's chief strategist, Cory Johnson, said in a wide-ranging interview with crypto-focused magazine Breaker. 

"When you look at XRP, there is no mining, so from a foreign-control aspect or from an environmental aspect, XRP is a very different beast. And in conversations we’ve had with the administration, they seem to get that and think that might matter."

China manufactures most of the world’s bitcoin and cryptocurrency mining equipment and its massive mining farms are supported by the country's cheap electricity prices.

Meanwhile, Ripple Labs controls 60% of the ripple supply, leading to critics of the company and the digital token suggesting it is not decentralized like many other cryptocurrencies.

September was a good month for Ripple Labs and the digital token it created XRP (which is often referred to as ripple).

Ripple's Swell event in San Francisco saw former U.S. president Bill Clinton talk up the possibilities of blockchain and cryptocurrencies and Ripple revealed it had signed up three financial services companies to its new XRP-focused product -- news of which had sent the ripple price up by over 100% earlier in the month.

The three companies – payment providers MercuryFX and Cuallix as well as cooperative financial firm Catalyst Corporate Credit Union – were announced as the first to sign up to xRapid by Ripple Labs CEO Brad Garlinghouse.

Earlier this year, global banking giant Santander launched a blockchain-based application for cross-border foreign exchange built by Ripple Labs — designed to speed up and cut the costs of sending money across borders.

Many are excited by ripple's practical use case, which has seen it work with many of the world's biggest banks and financial service companies to bring cryptocurrency's speed and efficiency to the rather clunky legacy financial systems.

"When I started to meet with people in government and regulators, I had very low expectations," Johnson added. "I have been truly amazed at the open-mindedness, number one. And number two, the smart questions, sometimes even tough questions. There’s clearly a lot of homework going on."

https://www.forbes.com/sites/billybambrough/2018/10/16/chinas-bitcoin-dominance-is-worrying-trumps-white-house-and-pushing-it-toward-ripple/

Will TRON Outscale and Outprice the Competition?

It has been a great news week for TRON (TRX), which announced a new partnership with BitTorrent, new fiat pairings on Bitfinex, and a big update to its platform.

This news has made TRX one of the biggest gainers in market price this month.

A New Contender
TRON has been a largely divisive project since its introduction to the altcoin market last September. TRON is building a platform for the development and launching of decentralized applications (dApps), similar to Ethereum and EOS.

The project garnered a great deal of attention when, at the height of the 2017 bull run, TRON’s market price jumped from $0.03 to $0.35 in less than a week. The price subsequently took a nose dive with the rest of the market in 2018 and has slipped back to a year-to-date low of under $0.02.

The project has been the topic of controversy in the past, with accusations from other developers that TRON had copied large amounts of code in building its platform and copied other information from competing ICOs’ whitepapers — making it seem like just another overhyped and overpriced vaporware project.

TRON, however, has pressed on, completing a successful mainnet launch and token swap in June. It has since made some new developments that are breathing new life into the platform.

The King Of Announcements
TRON CEO Justin Sun loves to make announcements, and he’s made quite a few this past week that are looking good for the project.

The team recently announced new fiat pairs on cryptocurrency exchange giant Bitfinex, adding pairs for JPY, EUR, and GBP.

TRON also unveiled its partnership with BitTorrent for a project they are calling “Project Atlas” to create a new decentralized peer-to-peer sharing network. The BitTorrent teams original client, ‘µTorrent Web,’ already has over 100 million active monthly users, and TRON wants to connect the client with TRON’s decentralized network on the blockchain.

In a Tweet made by Sun earlier today, he announced:



With successful smart contracts and dApps launching on TRON’s mainnet, it remains in the running to be crowned top-dog of the decentralized application platform arena.

TRON’s (TRX) market price has reacted favorably this past month, gaining over 50 percent. It is hot on the heels of bumping Monero out of the number 10 spot on Coinmarketcap’s cryptocurrency rankings by market cap.

https://beincrypto.com/justin-sun-touts-tron-odyssy/

How can one prepare for this please?

The plan is no gift to the masses, but a tool for our further enslavement

In 2016, I was invited to Uber’s headquarters (then in San Francisco) to talk about the failings of the digital economy and what could be done about it. Silicon Valley firms are the only corporations I know that ask for private talks for free. They don’t even cover cab fare. Like Google and Facebook, Uber figures that the chance to address their developers and executives offers intellectuals the rare privilege of influencing the digital future or, maybe more crassly, getting their books mentioned on the company blog.

For authors of business how-to books, it makes perfect sense. Who wouldn’t want to brag that Google is taking their business advice? For me, it was a little different. Throwing Rocks at the Google Bus was about the inequity embedded in the digital economy: how the growth of digital startups was draining the real economy and making it harder for people to participate in creating value, make any money, or keep up with rising rents.

I took the gig. I figured it was my chance to let my audience know, in no uncertain terms, that Uber was among the worst offenders, destroying the existing taxi market not through creative destruction but via destructive destruction. They were using the power of their capital to undercut everyone, extract everything, and establish a scorched-earth monopoly. I went on quite a tirade.

To my surprise, the audience seemed to share my concerns. They’re not idiots, and the negative effects of their operations were visible everywhere they looked. Then an employee piped up with a surprising question: “What about UBI?”

Wait a minute, I thought. That’s my line.

Up until that moment, I had been an ardent supporter of universal basic income (UBI), that is, government cash payments to people whose employment would no longer be required in a digital economy. Contrary to expectations, UBI doesn’t make people lazy. Study after study shows that the added security actually enables people to take greater risks, become more entrepreneurial, or dedicate more time and energy to improving their communities.

So what’s not to like?

Shouldn’t we applaud the developers at Uber — as well as other prominent Silicon Valley titans like Facebook co-founder Chris Hughes, bond investor Bill Gross, and Y Combinator’s Sam Altman — for coming to their senses and proposing we provide money for the masses to spend? Maybe not. Because to them, UBI is really just a way for them to keep doing business as usual.

Uber’s business plan, like that of so many other digital unicorns, is based on extracting all the value from the markets it enters. This ultimately means squeezing employees, customers, and suppliers alike in the name of continued growth. When people eventually become too poor to continue working as drivers or paying for rides, UBI supplies the required cash infusion for the business to keep operating.

When it’s looked at the way a software developer would, it’s clear that UBI is really little more than a patch to a program that’s fundamentally flawed.

The real purpose of digital capitalism is to extract value from the economy and deliver it to those at the top. If consumers find a way to retain some of that value for themselves, the thinking goes, you’re doing something wrong or “leaving money on the table.”

Back in the 1500s, residents of various colonized islands developed a good business making rope and selling it to visiting ships owned by the Dutch East India Company. Sensing an opportunity, the executives of what was then the most powerful corporation the world had ever seen obtained a charter from the king to be the exclusive manufacturer of rope on the islands. Then they hired the displaced workers to do the job they’d done before. The company still spent money on rope — paying wages now instead of purchasing the rope outright — but it also controlled the trade, the means of production, and the market itself.

Walmart perfected the softer version of this model in the 20th century. Move into a town, undercut the local merchants by selling items below cost, and put everyone else out of business. Then, as sole retailer and sole employer, set the prices and wages you want. So what if your workers have to go on welfare and food stamps.

Now, digital companies are accomplishing the same thing, only faster and more completely. Instead of merely rewriting the law like colonial corporations did or utilizing the power of capital like retail conglomerates do, digital companies are using code. Amazon’s control over the retail market and increasingly the production of the goods it sells, has created an automated wealth-extraction platform that the slave drivers who ran the Dutch East India Company couldn’t have even imagined.

Of course, it all comes at a price: Digital monopolists drain all their markets at once and more completely than their analog predecessors. Soon, consumers simply can’t consume enough to keep the revenues flowing in. Even the prospect of stockpiling everyone’s data, like Facebook or Google do, begins to lose its allure if none of the people behind the data have any money to spend.

To the rescue comes UBI. The policy was once thought of as a way of taking extreme poverty off the table. In this new incarnation, however, it merely serves as a way to keep the wealthiest people (and their loyal vassals, the software developers) entrenched at the very top of the economic operating system. Because of course, the cash doled out to citizens by the government will inevitably flow to them.

Think of it: The government prints more money or perhaps — god forbid — it taxes some corporate profits, then it showers the cash down on the people so they can continue to spend. As a result, more and more capital accumulates at the top. And with that capital comes more power to dictate the terms governing human existence.

Meanwhile, UBI also obviates the need for people to consider true alternatives to living lives as passive consumers. Solutions like platform cooperatives, alternative currencies, favor banks, or employee-owned businesses, which actually threaten the status quo under which extractive monopolies have thrived, will seem unnecessary. Why bother signing up for the revolution if our bellies are full? Or just full enough?

Under the guise of compassion, UBI really just turns us from stakeholders or even citizens to mere consumers. Once the ability to create or exchange value is stripped from us, all we can do with every consumptive act is deliver more power to people who can finally, without any exaggeration, be called our corporate overlords.

No, income is nothing but a booby prize. If we’re going to get a handout, we should demand not an allowance but assets. That’s right: an ownership stake.

The wealth gap in the United States has less to do with the difference between people’s salaries than their assets. For instance, African-American families earn a little more than half the salary, on average, that white American families do. But that doesn’t account for the massive wealth gap between whites and blacks. More important to this disparity is the fact that the median wealth of white households in America is 20 times that of African-American households. Even African-Americans with decent income tend to lack the assets required to participate in savings accounts, business investments, or the stock market.

So even if an African-American child who has grown up poor gets free admission to college, they will still likely lag behind due to a lack of assets. After all, those assets are what make it possible for a white classmate to take a “gap” year to gain experience before hitting the job market or take an unpaid internship or have access to a nice apartment in Williamsburg to live in while knocking out that first young adult novel on spec, touring with a band, opening a fair trade coffee bar, or running around to hackathons. No amount of short-term entitlements substitute for real assets because once the money is spent, it’s gone — straight to the very people who already enjoy an excessive asset advantage.

Had Andrew Johnson not overturned the original reconstruction proposal for freed slaves to be given 40 acres and a mule as reparation, instead of simply allowing them to earn wage labor on former slaveowners’ lands, we might be looking at a vastly less divided America today.

Likewise, if Silicon Valley’s UBI fans really wanted to repair the economic operating system, they should be looking not to universal basic income but universal basic assets, first proposed by Institute for the Future’s Marina Gorbis. As she points out, in Denmark — where people have public access to a great portion of the nation’s resources — a person born into a poor family is just as likely to end up as wealthy as peers born into a wealthier household.

To venture capitalists seeking to guarantee their fortunes for generations, such economic equality sounds like a nightmare and unending, unnerving disruption. Why create a monopoly just to give others the opportunity to break it or, worse, turn all these painstakingly privatized assets back into a public commons?

The answer, perhaps counterintuitively, is because all those assets are actually of diminishing value to the few ultra-wealthy capitalists who have accumulated them. Return on assets for American corporations has been steadily declining for the last 75 years. It’s like a form of corporate obesity. The rich have been great at taking all the assets off the table but really bad at deploying them. They’re so bad at investing or building or doing anything that puts money back into the system that they are asking governments to do this for them — even though the corporations are the ones holding all the real assets.

Like any programmer, the people running our digital companies embrace any hack or kluge capable of keeping the program running. They don’t see the economic operating system beneath their programs, and so they are not in a position to challenge its embedded biases much less rewrite that code.

As appealing as it may sound, UBI is nothing more than a way for corporations to increase their power over us, all under the pretense of putting us on the payroll. It’s the candy that a creep offers a kid to get into the car or the raise a sleazy employer gives a staff member who they’ve sexually harassed. It’s hush money.

If the good folks of Uber or any other extractive digital enterprise really want to reprogram the economy to everyone’s advantage and guarantee a sustainable supply of wealthy customers for themselves, they should start by tweaking their own operating systems. Instead of asking the government to make up the difference for unlivable wages, what about making one’s workers the owners of the company? Instead of kicking over additional, say, 10% in tax for a government UBI fund, how about offering a 10% stake in the company to the people who supply the labor? Or another 10% to the towns and cities who supply the roads and traffic signals? Not just a kickback or tax but a stake.

Whether its proponents are cynical or simply naive, UBI is not the patch we need. A weekly handout doesn’t promote economic equality — much less empowerment. The only meaningful change we can make to the economic operating system is to distribute ownership, control, and governance of the real world to the people who live in it.

https://medium.com/s/powertrip/universal-basic-income-is-silicon-valleys-latest-scam-fd3e130b69a0

Note, bankroll was only $600 or so, I will consider the experiment a huge, huge success if I could double that in a year.

Hundreds of startups that did token sales are finding out they’re in violation of securities law— including many that were sure they did it the right way.

During the past few months, the Securities and Exchange Commission has significantly widened its crackdown on certain initial coin offerings, putting hundreds of cryptocurrency startups at risk.

The SEC sent out a slew of initial information-seeking subpoenas at the start of 2018. Now the agency has returned to many of those companies, and subpoenaed many more—focusing on those that failed to properly ensure they sold their token exclusively to accredited investors.

The agency is exerting pressure on many of those companies to settle their cases. In response, dozens of companies have quietly agreed to refund investor money and pay a fine. But many startups that have been subpoenaed say they are left in the dark struggling to satisfy the SEC’s demands, and are uncertain of how others are handling it, according to conversations with more than 15 industry sources as part of a joint investigation by Yahoo Finance and Decrypt.

The sources, many of whom are employees of companies that were subpoenaed by the SEC or are attorneys for those companies, requested anonymity, because the SEC restricts them from discussing the matter.

ICO funding, which began in 2014, exploded in popularity last year as an alternative method to fund a cryptocurrency startup, rather than the traditional venture capital route. In an ICO, a startup sells its own digital token, typically for later use in the ecosystem the startup plans to build; buyers pay for the token in the cryptocurrencies bitcoin or ether. In the majority of cases, companies that do ICOs have not yet launched any product. Think of an ICO as buying chips for use in a casino that hasn’t been built yet.

It is hard to say precisely how many ICOs occurred during the past four years. ICO Alert says it has tracked more than 5,000 but publicly displays only 3,400 “legitimate” ones. CoinDesk, a leading bitcoin trade publication, lists only 800 in the past two years. More than $20 billion has been raised in ICOs to date, but the ICO boom peaked in January 2018. Concerns over the legality of token sales have had a chilling effect.

The core issue now for every company that did an ICO: Was its “token” a security? And if it was, did the company register its offering with the SEC, or ensure that it qualified for an exemption?  

Many of the companies that did ICOs called their offering something else, such as a “utility token” or a “SAFT” (Simple Agreement for Future Tokens, an ICO method in which investors buy a reservation for tokens yet to be launched), but the SEC does not care about those labels. It weighs each ICO on a case-by-case basis.

In July 2017, the SEC announced that it viewed the tokens offered by The DAO, an ICO that raised more than $150 million in 2016, as securities. Then, at a Senate hearing in February, SEC Chairman Jay Clayton said, “I believe every ICO I’ve seen is a security.”

William Hinman, the SEC’s director of corporation finance, provided further clarity in June at Yahoo Finance’s All Markets Summit when he said ether does not appear to be a security, but suggested that most ICOs are securities offerings, and that, “calling the transaction an initial coin offering, or ‘ICO,’ or a sale of a ‘token,’ will not take it out of the purview of the U.S. securities laws.”

Any U.S. company offering a security must register its offering with the SEC, or qualify for an exemption. Amid the ICO boom, virtually none have registered a security offering. Thus, they must meet an exemption. The SEC exemptions include selling only to investors outside the U.S., or selling only to accredited investors, which are individuals with income higher than $200,000 in each of the past two years or a minimum net worth of $1 million.

Ensuring that investors are fully accredited requires, as the SEC spells out plainly, “reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like.” In other words, it involves a lot more than just checking a box.

Many companies that thought they did properly limit their ICO to accredited investors are now finding out that in the eyes of the SEC, they didn’t.

Robert Cohen, chief of the cyber unit in the SEC’s enforcement division, likens it to a spectrum. When the SEC calls up a company that did an ICO and asks how the company limited its ICO to certain investors, “Some companies tell us the name of the law firm that advised them, explain the know-your-customer procedures they followed, and show us an investor list that is limited to accredited investors,” he says. “At the other end of the spectrum, some point to a website statement about limiting the ICO to some investors, and possibly checkboxes, and that’s it.”

Some of the people particularly surprised to be in trouble are those who did their ICO as a SAFT, a designation that was intended specifically to be more compliant with securities law.

But some onlookers have little sympathy. Cardozo Law School professor Aaron Wright, who co-authored a paper that questioned the legality of the SAFT model, says, “There could have been other ways they could have structured it, like selling a digital good to people who actually wanted to use it, instead of predominately to speculative investors. They could have talked to the SEC first. I think the law was pretty clear that if you sell something to an investor, it’s likely a security—folks just wanted to engage in token sales, so they just kind of flouted it.”

In December 2017, the SEC shut down the $15 million ICO of a startup called Munchee and forced the company to refund the buyers. Munchee had advertised that its token would go up in value; promises of financial returns are a red flag for the SEC.

In January 2018, the SEC shut down the ICO of AriseBank, which had raised $600 million of a $1 billion goal, for falsely stating it had bought an FDIC-insured bank. In April 2018, the SEC shut down the $32 million ICO of Centra, which had been promoted by boxer Floyd Mayweather and rapper DJ Khaled, for using “misleading marketing” and “paid celebrities” to make false claims. Last month, the SEC charged TokenLot, which called itself an “ICO Superstore,” with being an unregistered broker-dealer, and charged Crypto Asset Management (CAM) with false marketing and being an unregistered investment company.

Those are just some examples that the SEC announced publicly.

Behind closed doors, many more negotiations are underway. The SEC has gotten dozens of ICOs to refund buyers and pay a fine, simply by reaching out and asking questions.

When the SEC reaches out to companies that did an ICO, it is usually through the company’s law firm. The SEC requests a vast trove of documents related to the ICO. Yahoo Finance and Decrypt have obtained communication that the law firm Cooley, which represented many ICOs, sent to one client after an SEC subpoena. The attorney letter warns, “The SEC is likely examining whether [client] should be considered a security under the U.S. federal securities laws… For the purposes of this preservation hold, ‘document’ is defined very broadly.”

Such language is leading many companies to refund their ICOs rather than attempt a legal fight. As one source at a company that got subpoenaed says, “The last thing we want is a press release they put out with only our name on it.”

Refunding tokens
The Fan-Controlled Football League (FCFL), the first ICO to be listed on the mainstream crowdfunding platform Indiegogo (through a partnership with MicroVentures), is one example. FCFL raised $5.2 million last year. In August of this year, MicroVentures quietly returned the money to the initial buyers.

There’s just one problem with refunding. If an ICO gathered the proper information on its buyers, and hadn’t yet launched its token, returning the money is doable. But for ICOs that have launched their token, refunding is not so simple.

“It’s not even really possible,” says Jony Levin, CEO of Chainalysis. “In a lot of cases people bought tokens in ICOs through exchange accounts at places like Kraken. So you can’t just send tokens back to the address you got them from, because that’s an exchange address. If ICOs are made to refund buyers, it will have to be similar to the Mt. Gox case: you make a public announcement and people have to prove they were a contributor.”

As a way to pacify the SEC, some ICOs are attempting to convert their utility token to a security token. Iconomi, which raised more than $10 million in an ICO, is one example. In a blog post this month, Iconomi wrote that its token holders, “will be able to exchange their ICN tokens for tokenized shares in a joint-stock company presented as eICN tokens. This new structure brings legal clarity for all stakeholders.”

Filecoin, Blockstack, Props, Origin, and TrustToken, the five ICOs that have listed on the platform CoinList, all sold only to accredited investors, and none have launched their actual token yet. A source close to Blockstack says the company sees its token as a utility, but out of caution, chose to treat it like a security and comply with all the relevant securities laws.

“Right now it feels like a massive canyon”

All of this SEC action may sound like very bad news for ICOs, but many in the industry have a more optimistic take: regulatory clarity will bring growth. In addition, more and more companies considering a token sale are now reaching out to the SEC proactively.

“I do think that businesses on the up-and-up can navigate through it, and that in just two or three years we’ll have clarity, and we’ll look back on this time as a speed bump,” says the CEO of a well-known tech company who has closely watched the ICO space. “Of course, if you’re a company that is dealing with an SEC subpoena, right now it doesn’t feel like a speed bump, right now it feels like a massive canyon.”

The lingering lack of clarity has driven a group of crypto companies, led by Ripple, to hire D.C. lobbyists to push Congress on behalf of the industry.

From the SEC’s perspective, there is no lack of clarity. The sniff tests are the same as they have been for decades. The SEC is applying the same securities laws to ICOs that it always applies.

“Everybody’s holding their breath for the SEC to create some kind of coin rule, and they’re not going to,” says a securities attorney at one high-profile Silicon Valley firm. “They’re applying the same laws, the same statutes, the same rules, to stocks and bonds and everything else.”

In other words, there’s even a lack of clarity around whether there is a lack of regulatory clarity.

https://decryptmedia.com/2018/10/10/sec-tightens-the-noose-on-ico-funded-startups/