Fri, April 26, 2024 at 17:07

• 

  Kang-hoon

  • Hello Annie.

  • Today, I have some news about the crypto investment sector.

  • Miles Jennings, a lawyer with Andreessen Horowitz's crypto investment arm, a16z, has issued a warning about web3 projects selling tokens publicly in the US to raise funds.

  • 
• Annie

  • Oh really?😮 Why is that?

  
• 

  Kang-hoon

  • According to Jennings, the U.S. Securities and Exchange Commission (SEC) has made it clear that Initial Coin Offerings (ICOs) fall under the ambit of securities laws.

  • In many ICOs, token issuers made promises to investors that they were going to fund their operations with the proceeds from the token sale and deliver a future return to investors.

• Annie

  • So, it's like selling shares of stock, isn't it?

  
• ADward

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• 

  Kang-hoon

  • Exactly.

  • Regardless of whether the instruments being sold were digital assets or shares of stock, these cases were securities transactions.

  • The SEC subjected ICOs to securities laws amid the popularity of this fundraising activity back in 2017.

• Annie

  • I see...

  • So, what's happening now?

  
• 

  Kang-hoon

  • While the industry has since moved away from public US token sales, ICOs still re-emerge in new forms.

  • Some invent new schemes, hoping that a slight change in facts warrants a different outcome.

  • Protocol Owned Liquidity and Liquidity Bootstrapping Pools are examples of such schemes.

• Annie

  • Hmm... sounds complicated.😕

  
• 

  Kang-hoon

  • Indeed, it is.

  • But Jennings advises projects to avoid these schemes as there are alternative ways to raise funds without the risk of legal trouble with the securities watchdog.

• Annie

  • So, what are the alternatives?

  
• 

  Kang-hoon

  • Public sales of equity and tokens outside the US and private sales of equity and tokens can all be done in a compliant manner without being subject to the registration requirements of securities laws.

• Annie

  • Got it!

  • So, is this news good or bad for the market?

  
• 

  Kang-hoon

  • In my opinion, this news can be seen as a negative one.

  • It shows that regulatory scrutiny is increasing in the crypto space, which could potentially hinder the growth of new projects.

  • 

  • However, it also emphasizes the importance of compliance and could lead to more sustainable growth in the long run.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.