This week, in a post in Washington on-edRobinhood CEO Vlad Tenev has called for a new approach to capital markets in the United States. He proposed a number of rules – Modernizing the investor’s accredited standard is an old Favorite Among the financial wins – but one stands. “(T) here needs to exist a regime of security token regime, which allows companies to create token offerings that are open to US investors.” Here, Tenev seized the skeleton key to unlock the full cryptocurrency potential.
Here’s how security markets in the United States work. By default, companies are not allowed to sell equity. The Securities Act of 1933 Security is determined and prescribed conditions – and penalties – for sale of them. If a company wants to raise money, it hire a lawyer like me and either register or find an exception such as regulation D (reg d).
Most choose an exemption and go private. And as Tenev points out, many of Yun Choose to stay that way – Openai, Spacex or Stripe. But exempt security is not easy to trade. They generally have been fertile contractual restrictions and regulations that make illiquid. For the richest some companies, it may be fine – or even the point. But not for the most part. If there is no liquid secondary market, investors can only realize the income by Dividends. And where investors do not realize the gains, the main markets are running the same.
Registered security, on the other hand, are highly liquid in the second market. This means that investors usually jump to participate in an initial public offering. But this process is Din Limited to the richest company by massive price tag. Pwc Estimates That even relatively small initial public offerings cost millions of dollars, with millions more than annual legal fees and compliance. This is still considered to be the diligent transparency and forfeiture of control with registration. For these reasons even the leading companies will “avoid going public,” Tenev said.
No secret that this is a problem. Washington DC has recently tried to address it by creating a regulation of crowdfunding (reg cf) to 2012 Jobs Act. The idea is to make exempt securities easier to access small and medium businesses (SMB), but they can’t just help themselves. Familiar restrictions on secondary liquidity hamstring the program. Combined with compliance costs, the result will never be a significant segment of US capital markets.
Instead, the solution comes from the outside. Ethereum developers introduced the ERC-20 Standards in 2015, allowing anyone to create an arbitrary number of tokens and sell them to instant liquidity. Project founders can restrict the resale as they choose. But, in practice, the best projects are developing deep, great markets quickly. These fungible tokens take different names and function, but practical, at one time, they are the Internet capital market.
At the top of the safe, unbelievable blockchain technology, the important success is only Allows people to buy and sell tokens independently. It turns out that it’s a product that people really want, and initial coins offering Grow up 100x between Q1 and Q4 of 2017.
This moment of halcyon Good documented. In these days, it is very difficult to make a legal basic sale of token in US projects left Give tokens for free. Even then, a single successful hyperliquid Airdrop Created more value in one day than all Reg CF offerings from 2021 to 2023 Sinamabi.
Instead of acting in the past, however, Tenev emphasizes the future:
“Private company’s stock will allow retail investors to invest in leading companies in advance of their life cycles … enabling them to draw additional capital by tapping a global Crypto retail market … (IT) will () give an alternative path to traditional iPo (.) ”
He calls it “tokenized real-world assets.” I call it a regulation Third way. Sitting between exempt securities and public offerings, the SEC should express policies that allow projects to sell security in the form of cryptocurrency tokens with limited compliance and disclosure – combining the relative -child being Simple of a private placement with a second liquidity of a public offer.
We already know the first-order effects of such a system. In 2017 and 2018 more than 2,000 projects Sold tokens to raise more than $ 13 billion. As Tenev points out, “The risks are highest where the opportunity for upside down is the greatest” and many of the earlier crypto companies failed. Many survivedAlthough, and still building now. Previous investors grew, and their leaders remain face of the industry.
The effects of the second-order are where the true value is accumulated. Compared to any traditional security offer, the launch of the cryptocurrency token is nothing less cheap. Some EstimatesThere is as many as a trillion dollar of the potential demand of SMB capital in the United States. This suggests extensive potential for on-chain fundraising. No one knows what access to this capital means-some are unobtrusive-but there is a real potential that nonsense markets are experiencing the development of asymmetry.
Of course, there are risks beyond lost investment, too. A liberalized cryptocurrency regime may avoid some or all current public security regime. It is, in its efficacy, radically reduce compliance and disclosure requirements for public companies, perhaps distracting market efficiency and increasing deception.
But why the anchor in the status quo? A third-way regime may require disclosure without being as stressful as public registration. Consumer protection does not have to exit the laws written previously running water is all in – below the cryptographically secure blockchain network.
It is not clear that public security will still be lost. The relative cost of compliance decreases on the scale. For mature companies, investors will probably ask for traditional disclosure and willing to pay a corresponding premium replacement. If they hadn’t, maybe the time of these laws would have come.
It is difficult to imagine anyone who comes to the contemporary regime from the first principles. The president may launch a memecoin, but the tokens that are setting in business foundations are First Facie Illegal. So, here I am second what Tenev said, “It’s time to update our talk about crypto from Bitcoin and Memecoins to what’s really possible with the blockchain.” Let’s put security in the chain.
