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Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1 Digital finance: Federal Council sets out areas of action for coming years The Federal Council sees great potential for Switzerland as a business location in the digitalisation of the financial market. […]
The post XBRL News from Switzerland, EU and the US appeared first on Daily Fintech.
Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1 A broader and deeper use of structured data CFA Institute recently co-sponsored the XBRL Investor Forum 2021: Data That Delivers. SEC Commissioner Caroline Crenshaw gave a keynote speech outlining the extensive […]
The post XBRL News about case studies, structured data and Oman appeared first on Daily Fintech.
Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1 SEC adopts final amendments under the Holding Foreign Companies Accountable Act In December 2020, the Holding Foreign Companies Accountable Act, co-sponsored by Senators John Kennedy, a Republican from Louisiana, and Chris Van Hollen, […]
The post XBRL News about ESG and the USA appeared first on Daily Fintech.
Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1 XBRL and why it is important for South Africa This is the first in a series of articles exploring XBRL. Our next article will consider how XBRL was developed and the […]
The post XBRL News from around the world appeared first on Daily Fintech.
Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1 What to look for in the SEC climate disclosure proposal The U.S. Securities and Exchange Commission is expected to announce its proposal to enhance climate disclosure rules, perhaps before the new […]
The post XBRL News from the US and Switzerland appeared first on Daily Fintech.
Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1 Ep. 5: Jason Meyers on Continuous Audit and Real-Time Reporting Jason is currently developing the only known use case of blockchain for the auditing industry with AuditChain, and bringing some much […]
The post XBRL News about sustainability reporting, proxy votes and value chain reengineering appeared first on Daily Fintech.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO and Editor of Daily Fintech and author of The Blockchain Economy. Hoping 3 pictures will paint a thousand words
The post Real Entrepreneurs want to STO appeared first on Daily Fintech.
NEWS – Crypto and Security Token Exchange INX to Raise $130 Million in Landmark IPO: INX Limited, a crypto exchange startup, plans to raise up to $129.5 million through an IPO, in the first security token sale registered with the U.S. Securities and Exchange Commission. No, that’s not a typo for “ICO,” the initial coin offerings […]
The post Hybrid Security Tokens – What are they and What are they not? appeared first on Daily Fintech.
TLDR. Napster blew up the music business with free and illegal. Then we had low cost and legal like Spotify, Pandora and iTunes. The same is happening to innovation capital. The summer of 2017 ICO, kicked off by Bancor, was the now illegal way to raise a lot of money easily and at virtually no cost. That was a lousy deal for investors and naturally then regulators jumped in.
This update to The Blockchain Economy digital book covers:
What is broken in the legacy innovation capital business
In March 2017, in Crypto equity via ICO and the other innovation chasm we wrote that:
“Most entrepreneurs understand the chasm between MVP (Minimum Viable Product) and PMF (Product Market Fit). The low cost to build MVP increases supply, but real demand does not change that fast, so lots of MVP ventures fall into the chasm (i.e. they fail).
The next chasm is less well understood. This is the chasm between PMF and Liquidity (via an IPO on the Public Markets and failing that via trade sale).
Today, we don’t see this chasm so clearly because there is a very expensive bridge across it – in a few locations. The very expensive bridge is provided by the big PE/VC Funds.”
Why the ICO went too far in the opposite direction
In 3 hours that shook my world: the Bancor ICO in June 2017 we described Bancor raising over $150 million in 3 hours in an ICO that kicked off the ICO craziness in 2017 when ventures could raise huge sums on not much more than a “minimally viable white paper”. The ICO went too far in the opposite direction – good for the entrepreneur and bad for the investor.
The news about Blockstack and Reg A
The news as reported in many media outlets was that the SEC gave Blockstack the go-ahead to conduct a $28 million digital token offering under Regulation A (which enables smaller companies to raise money from the public with less strenuous accounting and disclosure standards than a traditional IPO).
This is big news because the SEC is creating a new protocol for token offerings under Reg A. This is tokenized early stage crowdfunding. While neither tokens nor crowdfunding are new, this the first time they have been combined in a global market that US public investors can participate in.
America has been losing ground in crypto as it was not perceived as a friendly regulatory environment. This news is a big win for American entrepreneurs and investors.
Reg A Basics
“is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $50 million in a 12-month period. For offerings of up to $20 million, companies can elect to proceed under the requirements for either Tier 1 or Tier 2.
There are certain basic requirements applicable to both Tier 1 and Tier 2 offerings, including company eligibility requirements, bad actor disqualification provisions, disclosure, and other matters. Additional requirements apply to Tier 2 offerings, including limitations on the amount of money a non-accredited investor may invest in a Tier 2 offering, requirements for audited financial statements and the filing of ongoing reports. Issuers in Tier 2 offerings are not required to register or qualify their offerings with state securities regulators.”
Blockstack Basics
Blockstack describe themselves as the” easiest way to build decentralized apps that can scale” and claim over 120 independent developer teams that have built apps on Blockstack.
Like Ethereum and many ICOs, Blockstack is a developer-focussed open source platform. It is the sort of innovation that the crypto community needs.
Jurisdictional competition will continue
In Some Governments Want To Shut Down Bitcoin But They Don’t Know How we wrote that:
“For a long time, entrepreneurs faced competition and regulators sent them the rule book. Regulators were government employees who thought about competition only in the abstract; competition was something that other people had to worry about.Today, the environment is more fluid as governments recognize the economic return on innovation in terms of jobs and GDP growth. The regulators now face real competition because their political masters have to keep citizens happy and citizens care about jobs and GDP growth. Both Fintech upstarts and incumbent global banks are increasingly mobile; so jobs can disappear fast if regulators get it wrong. Plus, innovation is the primary driver of productivity which drives GDP per capita. Pity the poor regulator who must balance that with protecting citizens from fraud and enforcing existing laws.”
This jurisdictional competition is a good thing because while, the SEC may have got it almost right with Reg A and the Blockstack token offering, there is still room for improvement. If you look at the details, you will see that accredited investors get in early and the public get in later. The public gets in earlier than they do in a traditional IPO, but this is still a two tier market. In a global market with jurisdictional competition, expect big moves by Singapore, Hong Kong, UK, Switzerland the EU and other tech/finance centers.
Context & References
3 hours that shook my world: the Bancor ICO in June 2017.
Crypto equity via ICO and the other innovation chasm
Some Governments Want To Shut Down Bitcoin But They Don’t Know How
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
The post Amazingly, the SEC may have got it almost right with the Reg A Blockstack token offering and this may define a new innovation capital market appeared first on Daily Fintech.
TLDR On 3rd April 2019, the US Securities Regulator, SEC, issued a public response to TKJ (TurnKey Jet Inc) that stated unequivocally that the Tokens issued by TKJ are not securities. This may offer regulatory clarity for Utility Tokens, but the devil is as always in the details. This post is one entrepreneur’s attempt to parse these details to understand the legal landscape around Tokens.
Here is the original SEC announcement.
IANAL Disclaimer. I Am Not A Lawyer. Get proper legal advice. This is just one entrepreneur talking to other entrepreneurs.
This update to The Blockchain Economy digital book covers:
Takeaways from each of the points in the SEC notice.
Our takeaways in italics
Don’t use Utility Tokens to raise capital. For that, use Security Tokens. TKJ was not raising capital. In venture terms, you need to at least have working code ie MVP (Minimum Viable Product).
In short, use Utility Tokens for marketing, not for capital raising. PrePaid Tokens work when supply is limited. This is clearly true for air charter services (which is what TKJ offers) and most analog physical world services. If supply is limited, customers are motivated to order ahead. This is very different from most digital services which are defined by being unlimited supply (because of almost zero cost to copy). Smart entrepreneurs will figure out how to create premium digital services with limited supply but with digital efficiency. An example might be a physical artefact with some special branding for fans.
The term wallet is confusing here. The SEC definition seems to assumes open source crypto wallets that anybody can use. No problem, plenty of choice here. This is not like physical wallets where we can have multiple tokens (cash, loyalty cards, credit/debit cards) in a single wallet. In the digital realm, the equivalent to that physical wallet is our mobile phone. The term wallet as used by SEC is more like a combination of loyalty card with pre-paid card.
SEC jurisdiction is America where USD is the currency, so their reference currency is USD. For other jurisdictions the token will need to be priced in other currencies. The more fundamental point is that these tokens are non-fungible. You can ONLY use them to buy air charter services.
This is a sensible precaution against ponzi schemes, where the issuer gives early buyers a guaranteed profit. Note the words “unless a court within the United States”. Our mantra at Daily Fintech is “bits don’t stop at borders but money has to show its passport”; financial regulation is jurisdiction dependent.
Note that TKJ is NOT a cryptocurrency business; they are a business in the physical world that is using cryptocurrency technology to grow their business. This would be like selling Taxi Medallions as Tokens. The Medallion/Token buyer aims to offer a taxi service and may or may not be able to sell the Token/Medallion for a profit later. Utility Tokens are about marketing not capital raising. For a brief moment in 2017, entrepreneurs got a two for one deal in ICOs that enabled both marketing AND capital raising. Those days are over. Although the new rules seem like a limitation, the biggest issue for most ventures is marketing, not capital raising. So using Utility Tokens to reduce Customer Acquisition Cost (as we explore in this related chapter) is a big deal.
Case Law is different from Civil/Code Law
The SEC letter is no guarantee and the SEC staff reserves the right to change positions.
This is just how case law works.
The law in the USA & UK and many countries is case law (aka common law), where the law is established by the outcome of former cases (aka precedent). This is very different from what is sometimes called civil law (which I call Code Law for reasons explained below) in countries such as China, Japan, Germany, France
For more background on Case Law vs Civil/Code Law please read this.
Civil/Code law originated in the code of laws compiled by the Roman Emperor Justinian. Civil law has codified statutes. I prefer the term Code Law to Civil Law as this style of law is what developers/coders prefer and instinctively assume. You can turn Civil/Code law into computer code in Smart Contracts. It is much harder to do this with case law where you will often be told “well, it depends” or “it will be judged on a case by case basis”. This is why you must consult a lawyer and why the SEC announcement has this boilerplate language:
”This position is based on the representations made to the Division in your letter. Any different facts or conditions might require the Division to reach a different conclusion. Further, this response expresses the Division’s position on enforcement action only and does not express any legal conclusion on the question presented.”
Choose your playing field – Regulated or Unregulated
Fintech Entrepreneurs have 3 basic regulatory strategies to choose from:
Bitcoin is C. Companies northward in the stack provide the user facing functionality and can choose either A or B.
Context & References
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).