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Author Topic: organizing to affect future US regulatory action and  (Read 254 times)
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June 24, 2017, 06:21:45 AM

Hi All.  I'm a political economist.  Given the subfields on which I focused during my phd, I don't claim any special expertise on regulatory policy making, beyond the few courses you have to take as you get your degree.  

*Apologetically long-winded self-description of my knowledge set*  I am, however, an Americanist (someone who studies American political conflict) who eventually shifted his research to time series econometric modeling of financial markets.  That means I've studied financial markets, US government regulatory activity and the interaction thereof for a long while; including a year working for  a berkeley econ professor that served in a lot of regulatory capacities and had a 50 year association with major regulators -- Janet Yellen being a prime example (they both hold/held tenured positions at Berkeley and he and her are friends).  

(Again, sorry to talk about my background this much, it just seems pertinent).  The above is to say that I have no real authority on this topic, but I have thought about it pretty seriously for a long time.  I've also studied the two areas pertinent to this question (political response to US regulatory action and financial market regulatory change) in a way that most people don't get to do, as most experts don't focus on both US electoral conflict and the more straight-up econ-related issues relevant to these questions.  

Anyway, It's obvious that at some point the SEC is going to respond to the explosion of ICO activity.  I want to argue that we CAN actually influence that decision -- but by careful action before, not by organization after it happens.  

Here's why I say that:  This stuff just doesn't rise to the volume of, yaknow, Basel III liquidity measures for systemic risk banks, or other issues more important from their perspective (and, sorta, their charter).  But at some point a comically budget-strapped agency will need to claim a few scalps in order to look like a serious agency.  That means that they're likely going to rule on ICOs, and within the US and many other markets that initial decision is going to be what the law of the land is.  

(As an aside, there is a point where ICO-related financial institutions get adequately grown to the point that ICOs or ICO-like markets becomes important enough to large banks that they in turn pressure regulators to not act in too draconian a fashion.  But that point certainly isn't now.  It's more like 5 - 10 years from now.  Take a look at the growth trajectory of ICO behavior and tell me if you think the SEC will wait 5-10 years? )

To be clear, I'm not saying activity would necessarily be negative.  Solid chance we get a JOBS Act-type move by congressional Republicans, wherein they use some ICO-related liberalization as a fig leaf to roll back a set of actually-needed, important regulations. Bad for, yaknow, the world, but good for us.  Just as likely, though - if not more so - is a cart blanche application of the Howey Test, and a few visible take-downs to show they mean business.  

So what IS a strategy to affect what that initial, probably-only SEC decision?  A set of B2C or B2-public currency-powered firms that give mainstream American real, tangible benefits, and are capable of engendering considerable political pushback, should a weak regulatory agency act.  

Here's the selfish reason for me writing this all out:  It's an example of what I'm talking about.  Here's a plug that, if I was starting a business -- I'm starting a nonprofit -- I'd feel was a shameless plug.  But now it's a proud plug:'s ICO is being done to fund a nonprofit with two conjoined parts:

1.  a crowdfunding platform -- one where people who start projects don't do the work after campagning for it to be funded, it's done by others -- that takes it's fees as purchases of its cryptocurrency, ROOTS.  Because anyone can start a project but they don't have to do any actual work, we think we'll get a lot of organic demand as we do publicity-grabbing projects early on and get local stakeholders to open up their donor networks for visible, reputation burnishing work.  Because there's a hard-capped supply of tokens, that fee should reduce liquid supply and cause steady appreciation.  Oh, by the way, about 76% of the donated amount will be tax deductible.  

2.  Additionally, we'll organize day labor -- based on a model of homelessness-related policies coming out of, of all places, the American city of Albuquerque -- to complete the crowdfunded tasks, led by a supervisor.  Wages are paid in USD, but 50% of those wages (50% on top of decent wages) goes to a medium term "pension" fund-like entity.  Thus (these very poor) workers get a high-return, mandatory savings program, and have their interests aligned w/ investors who hold the coin hoping for appreciation.  That "pension fund" further removes liquid supply, driving coin price further up.  

So, the relationship between this topic and my (and Chris Place's) nonprofit: will do objectively morally good work, recruiting policy makers and stakeholders to be involved.  The work will be highly visible (physically actually out on the street in major urban areas, wearing bright shirts with a coin  logo).  

By itself it probably wouldn't change the debate at the SEC.  But I think that consumer-facing crowdfunding w/ a cryptocurrency that organically realigns the interests of politically-relevant groups... that's a generalizable battleplan.  If there are several of these companies or nonprofits posting up real humanitarian wins that consumers (voters) become aware of... that's a very different discussion at the SEC than if cryptocurrency-related companies remain inward facing, relative to those outside the cryptocurrency world.  

Anyway, thanks for your time.  We'd love your support.  This is one of those points when a growing community can decide to be effective politically - or not.      

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June 27, 2017, 09:44:43 AM

Anyway, It's obvious that at some point the SEC is going to respond to the explosion of ICO activity.  I want to argue that we CAN actually influence that decision -- but by careful action before, not by organization after it happens.  

With respect to your academic credentials.

The SEC has never done anything to regulate banks on activity which could be labeled immoral, unethical or illegal.

With JP Morgan, microsoft and other elites invested in ethereum and ICO's largely being affiliated with ETH.

What reason is there to believe the SEC will begin to crackdown on illicit activity now?

All evidence says: the SEC won't do more than look the other way as they have done for the past 5+ decades.

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