Blockchain Betting: The Solution to Financial Transparency?

Blockchain sportsbook technology can revolutionize financial transparency, ensuring secure, auditable transactions and reducing fraud risks.

I’ve been diving deep into the world of blockchain lately, and it’s hard not to be impressed by its potential. But like all technologies, it has its pros and cons. Take the recent news about the World Bank losing track of $24 billion in climate funds. Could blockchain have prevented that? Let’s explore.

What is Blockchain Sportsbook?

What exactly is this blockchain sportsbook thing? At its core, it’s a decentralized digital ledger that records transactions across a network of computers. Each transaction gets bundled into a block and linked to the previous one, creating an unchangeable chain of data. This setup could have saved the World Bank from looking like a clown right now.

And here’s where it gets interesting: every transaction on this ledger is transparent and can be viewed by everyone in the network. Imagine if all those missing funds were recorded on an immutable ledger! No one could mess with that data.

How Blockchain Could Save Us All

Now, let’s break down how this tech could revolutionize financial institutions:

First off, we have smart contracts. These are self-executing agreements that automatically trigger actions when certain conditions are met. They can automate processes like transactions and settlements, reducing the need for middlemen (and corrupt officials).

Then there’s the ability to detect suspicious activities. With everything laid out in public for anyone to see, large unusual transactions would stick out like sore thumbs.

And let’s not forget about compliance! It could help institutions meet regulatory requirements by providing a clear record of all transactions. Everyone can see it; everyone can verify it.

Lessons from Crypto Football Betting Platforms

I’ve also noticed some interesting lessons from crypto football betting platforms out there. You know those platforms where you place bets using cryptocurrencies? They’re pretty slick!

For one thing, they’re super transparent about fund management. Every bet placed and every payout made is recorded on an immutable ledger. No funny business allowed!

They also offer top-notch security and privacy. Each transaction is encrypted and linked to previous ones, making it nearly impossible for hackers to alter data.

But here’s where things get murky: regulatory compliance. While these platforms might be operating in a gray area right now, they sure make it easier for regulators to monitor activities with their open books.

The World Bank’s Hypocrisy?

Now back to our friend the World Bank: isn’t it a bit hypocritical for them to criticize cryptocurrencies when they have their own transparency issues? I mean just look at their own problems!

Some might argue that cryptocurrencies are different contexts altogether; after all, they’re just over two decades old as opposed to centuries old institutions like the World Bank! But maybe there should be some self-reflection first before pointing fingers…

Summary

So there you have it folks! Blockchain technology offers some serious solutions (and maybe even some better alternatives) for transparency issues faced by financial institutions today…if only someone would use them properly!

Circle’s Big Move: Hong Kong and the Future of Crypto Betting Platforms

Circle’s expansion in Hong Kong amid new regulations could reshape crypto betting platforms and stablecoin markets. Explore the implications.

Circle, the company behind USD Coin (USDC), is making a big play by setting up shop in Hong Kong. With the city gearing up to roll out a regulatory framework for stablecoins, it seems like an opportune moment for them. Hong Kong’s financial infrastructure is top-notch, and Jeremy Allaire, Circle’s co-founder and CEO, made it clear that this isn’t just a casual visit; it’s a strategic expansion. But as with everything in crypto, there are pros and cons to consider.

The Good: Circle’s Expansion and Hong Kong’s Readiness

First off, let’s talk about why this is good news for Circle. The Hong Kong government is about to introduce regulations specifically aimed at stablecoin issuers. This has caught the attention of several international players, including Circle. The timing couldn’t be better.

Hong Kong has been known as a financial hub for ages. It’s got all the bells and whistles—same-day U.S. dollar settlement capacity and being the largest capital market in the Asia-Pacific region makes it an attractive locale for any business looking to expand its reach. And while some may argue that these new regulations are stifling innovation, I think they’re trying to create an environment where businesses can operate smoothly—and where investors can feel safer.

The Bad: Stricter Regulations Might Push Some Away

However, it’s not all sunshine and rainbows. The new rules set forth by Hong Kong’s Securities and Futures Commission (SFC) are pretty strict. If you’re running a decentralized crypto betting platform, good luck trying to get licensed under those conditions! You’ll need to comply with anti-money laundering (AML) laws and counter-terrorist financing (CTF) requirements—basically proving you’re not running some shady operation.

The SFC has made it clear that only platforms willing to play by these rules will be allowed to service retail investors—and even then, there’s a laundry list of conditions you have to meet first. So yeah, if your platform doesn’t fit into their definition of “acceptable”, you might want to rethink your target market.

Summary: A Double-Edged Sword?

In summary, Circle’s expansion into Hong Kong could very well change the game for digital assets—if you’re willing to play by their rules. The company’s partnerships with local firms like Hong Kong Telecom and fintech Thunes further solidify its foothold in the region.

But let’s not kid ourselves; these new regulations might just push some decentralized platforms underground or elsewhere—like maybe back into Bitcoin’s base layer? As always in crypto land, it’s all about finding that balance between innovation and regulation.

Strive Enterprises: Pioneering Bitcoin Integration in Wealth Management

Strive Enterprises integrates Bitcoin into wealth management, offering a hedge against economic risks. Discover their innovative approach and strategic moves.

Strive’s Bold Move into Bitcoin Wealth Management

I just came across this news about Strive Enterprises, the asset management firm co-founded by Vivek Ramaswamy. They’re launching a new division that’s all about integrating Bitcoin into client portfolios. The idea is to give clients a hedge against what they see as a pretty chaotic economic future. I mean, it’s not every day you hear about an asset management firm going all-in on crypto like this.

The reasoning behind it is interesting too. They’re citing things like global debt levels and geopolitical tensions as factors pushing them towards Bitcoin. Matt Cole, the CEO, claims that their focus on Bitcoin sets them apart from other firms. But honestly, how many people are ready to bet on crypto right now?

The Case for Bitcoin: Hedge or High Risk?

Now, let’s talk about Bitcoin itself for a second. There’s been some research floating around suggesting that it can act as a hedge during certain economic conditions. A study even mentioned that it’s particularly effective during short periods of policy uncertainty. But come on… we all know how volatile Bitcoin can be.

And then there’s the whole futures and ETFs angle. Apparently, using those to hedge spot Bitcoin is pretty effective according to some report by the International Swaps and Derivatives Association (ISDA). But again… isn’t that just kicking the can down the road? If your underlying asset is so unstable that you have to use derivatives to manage your exposure, maybe you shouldn’t be investing in it in the first place.

Regulatory Minefield Ahead

One thing’s for sure: trying to integrate crypto into traditional wealth management is going to be a regulatory nightmare. The article outlines so many challenges it’s almost comical:

  • Regulatory Uncertainty: Multiple agencies with overlapping jurisdictions? Good luck figuring that out.

  • Consumer Protections: With things like fraud and market volatility top of mind for regulators.

  • AML/KYC Issues: Crypto’s decentralized nature makes these protocols super tricky.

  • International Differences: Some countries are basically saying “no retail investors allowed” when it comes crypto.

It seems like any firm trying to go down this road will need a small army just to handle compliance issues.

Summary: Is This The Future?

So yeah, Strive Enterprises is making waves with its new division focused on cryptocurrency betting and wealth management. But whether or not this will become mainstream remains up in the air—especially given how turbulent things are right now.

As more firms explore digital assets, one has to wonder if they’re setting themselves up for either great success or spectacular failure down the line.

Crypto Queen’s Plea: Heather Morgan’s Role in the Bitfinex Hack

Heather Morgan, aka Razzlekhan, seeks leniency in the Bitfinex Bitcoin laundering case, highlighting ethical and gender dynamics in crypto crimes.

I just read about this woman, Heather Morgan, who’s facing some serious time for her role in laundering Bitcoin from the infamous Bitfinex hack. She’s the same one who tried to play off as a crypto “queen” and even had a cringy rap persona called “Razzlekhan.” Now she’s asking the court for mercy, claiming she’s all compliant and remorseful. But damn, this case is layered!

The Bitfinex Hack: A Quick Recap

First off, let’s talk about the hack itself. Back in 2016, hackers made off with around 120,000 Bitcoin from Bitfinex. At today’s prices? That’s roughly $8.2 billion! The couple apparently used all sorts of methods to launder that cash — crypto mixers, privacy services — you name it.

Morgan was arrested alongside her husband Ilya Lichtenstein (the mastermind behind the hack), and she didn’t waste any time pleading guilty to money laundering and fraud charges. Her lawyers are now trying to spin a narrative of a good little crypto lady who just followed her man into trouble.

Media Circus and Public Perception

What really caught my eye was how much media attention this has gotten. Morgan’s online persona is something else; it’s like a car crash you can’t look away from. And of course, the media loves a good femme fatale story — it makes for better clicks and views.

And let’s not ignore the comparisons being drawn with other notorious women in crypto crime like Ruja Ignatova from OneCoin fame. It almost feels like there’s an archetype being established here: women who engage in high-profile financial crimes.

Ethical Concerns About Crypto Betting

Now onto another layer: crypto betting platforms. These things are popping up everywhere and they’re as sketchy as they come. The anonymity that cryptocurrencies provide can easily be exploited for illegal activities — money laundering anyone? And let’s not even start on consumer protection issues; these betting sites are basically unregulated wild west.

Gender Dynamics at Play

It also got me thinking about gender dynamics within this space. The portrayal of women involved in these crimes could reinforce existing stereotypes that further marginalize women in an already male-dominated sector.

Morgan’s case might just be another instance of how societal narratives shape perceptions and possibly even outcomes in legal contexts.

Summary

So yeah, Heather Morgan’s plea for leniency paints a complicated picture when you zoom out a bit. As more people enter the cryptocurrency realm — whether as users or criminals — it becomes increasingly important to navigate these ethical waters carefully.

MicroStrategy’s $42 Billion Bitcoin Bet: Genius or Madness?

MicroStrategy’s $42B Bitcoin strategy impacts crypto betting markets, raising questions on sustainability, market influence, and financial health.

MicroStrategy is back in the news with a jaw-dropping plan to raise $42 billion to buy more Bitcoin. The company, led by the ever-controversial Michael Saylor, already holds a staggering 252,220 BTC, worth around $17.56 billion at current prices. This move has everyone asking: is this brilliant or just plain crazy?

The Strategy: A Deep Dive

So what exactly is going on? MicroStrategy’s strategy revolves around using debt and equity to acquire more Bitcoin. They’ve been successful in raising capital before—just recently they pulled in over $1 billion through an equity offering and another $1 billion via convertible senior notes.

But here’s the kicker: their core business isn’t doing so hot. In Q3 2024, they reported a 10% decline in revenue and a net loss of $433 million. If the software side of things keeps tanking, can they really sustain this focus on crypto?

The Numbers Game

MicroStrategy has developed an interesting metric called “BTC yield” to assess their performance. They claim to have a BTC yield of 17.8%, which seems impressive until you realize it’s all about how well they’re managing their debt.

They’ve issued over $2 billion in convertible notes and are paying hefty interest rates on those loans. Some analysts are raising eyebrows at that strategy; if things go south, will there be enough cash flow to cover those expenses?

Implications for Crypto Betting Platforms

Now let’s talk about the ripple effects of this bold move on the crypto ecosystem, especially on crypto betting platforms.

Mainstream Acceptance or Just Madness?

MicroStrategy’s massive Bitcoin purchases have arguably helped mainstream acceptance of Bitcoin as a legitimate asset class. With companies like MicroStrategy making such moves—especially after spot Bitcoin ETFs got greenlit—it’s hard not to feel that there’s less volatility and more confidence in cryptos these days.

This could bode well for online crypto betting sites looking to attract users who want exposure to this burgeoning market.

Setting Precedents

MicroStrategy’s actions might just be setting a precedent for other corporations out there. If big companies can integrate Bitcoin into their financial strategies, we might see an influx of institutional money that could change the game entirely.

But there’s also a flip side: what happens when these companies start selling? It could lead to some serious price swings given how concentrated some holdings are.

Risks Galore

Of course, it’s not all sunshine and rainbows. There are risks involved—huge ones at that! Regulatory changes could come down hard on corporations holding large amounts of Bitcoin, leading to fire sales that would devastate prices.

And let’s not forget about systemic risk; if several large entities were to experience financial distress due to heavy investment in such a volatile asset as Bitcoin, it could spell disaster for the entire financial system!

Summary: Will It Pay Off?

In summary, MicroStrategy’s audacious plan raises many questions—and doubts—as much as it raises eyebrows. While they’ve managed so far with their unique financing strategies and risk management techniques, one thing is clear: they’re walking a tightrope!

Whether this bold gamble pays off or leads them into chaos remains to be seen…

Immutable vs SEC: A Crucial Moment for Crypto Betting Platforms

SEC’s scrutiny on crypto betting sites intensifies as Immutable’s response sets a precedent. Explore the impact on decentralized gambling platforms.

The recent Wells Notice issued by the SEC to Immutable, a prominent player in decentralized gaming, has sent ripples through the crypto industry. As regulatory bodies ramp up their scrutiny, the absence of clear guidelines leaves many companies in a precarious position. This article delves into the ramifications of the SEC’s actions, the industry’s urgent plea for clarity, and how Immutable’s bold response could pave the way for other crypto betting platforms facing similar challenges.

The Rise of Crypto Betting Platforms

Crypto betting platforms are changing how we gamble online. By using blockchain technology, these sites offer transparent and decentralized betting experiences. From crypto sports betting exchanges to various online crypto betting options, these platforms allow users to place bets using cryptocurrencies. The benefits are hard to ignore: enhanced security, lower fees, and greater anonymity compared to traditional betting methods. But as these platforms gain traction, they also attract the attention of regulators like the SEC.

Understanding the SEC’s Wells Notice

The issuance of a Wells Notice against Immutable is a watershed moment for crypto projects. Essentially, it signals that the SEC is gearing up for enforcement action against them. Former SEC official Marc Fagel has called out this “regulation by enforcement” tactic as problematic; it leaves companies in limbo about what’s acceptable.

Immutable isn’t taking this lying down. They’ve publicly stated their intention to defend both their operations and the broader crypto ecosystem. Their response underscores a growing frustration within the industry about regulatory bodies that seem more interested in issuing vague threats than in fostering constructive dialogue.

The Industry’s Call for Clarity

As more companies find themselves in similar situations, one thing becomes clear: there’s an urgent need for regulatory clarity in cryptocurrency. Stakeholders across the board are echoing this sentiment. Without clear guidelines, how can anyone be expected to comply?

The current state of affairs not only hampers innovation but also increases administrative burdens on companies trying to navigate an opaque legal landscape. Clear rules would help ensure that all operators adhere to essential regulations like Anti-Money Laundering (AML) and Know Your Customer (KYC), which are crucial for maintaining integrity within any financial system.

Implications for Crypto Betting Sites

The consequences of the SEC’s aggressive stance are far-reaching—especially for crypto betting sites and their users. Such overreach can create an environment rife with uncertainty and hostility that stifles investment and innovation.

Moreover, it’s not just about creating a chilling effect; there are financial implications too. The Blockchain Association estimates that enforcement actions have already cost the industry around $400 million—a staggering figure that highlights how punitive these measures can be.

Summary: Navigating Towards a Stable Future

Immutable’s stand against what they perceive as unjust treatment may well set a precedent for other crypto companies facing similar challenges. As more entities rally around this call for clearer guidelines, one hopes there will be movement towards more constructive frameworks.

In essence, if decentralized gambling platforms are ever going to operate smoothly within this space—free from fear of sudden punitive action—the establishment of clear rules is absolutely essential. Whether or not we get there remains an open question; but one thing is certain: without clarity, chaos reigns—and so far it’s been anything but productive.

Is XRP Set to Soar? The Case for a $100 Target

XRP’s symmetrical triangle pattern and easing regulatory pressures could drive its price to $100, according to analyst Armando Pantoja.

XRP has been stuck in a holding pattern for what feels like an eternity. Seven long years of sideways action. But according to crypto analyst Armando Pantoja, we might be on the verge of something big. He’s predicting that XRP could break out and hit a staggering $100. His reasoning? A little thing called the SEC and its chairman, Gary Gensler. Let’s dive into the charts and see what’s cooking.

Understanding the Chart: Symmetrical Triangle

So what exactly is a symmetrical triangle? It’s basically a chart pattern that shows price consolidation before a potential breakout. You’ve got two converging trend lines, and historically, these patterns can lead to some serious price action—either up or down.

Now, here’s where it gets interesting. According to TradingView, these triangles are common in financial markets and usually indicate some sort of indecision before a big move. Thomas Bulkowski even wrote about them on his site ThePatternSite.com, explaining how they can act as both continuation and reversal patterns depending on the breakout direction.

In crypto specifically, these triangles have had mixed results. But looking at XRP right now, it seems like there’s a buildup of energy just waiting for the right moment to explode—if it breaks resistance.

The Regulatory Cloud Overhead

One major factor weighing down on XRP’s price has been regulatory scrutiny. The ongoing saga between Ripple Labs and the SEC has kept many investors on edge. Just recently, there was some clarity when the court ruled that Ripple’s programmatic sales of XRP didn’t constitute an unregistered securities offering. That news sent XRP soaring 20%. But then came the SEC’s appeal—and with it another price drop.

Enter Gary Gensler

If you ask me, one of the biggest roadblocks is SEC Chair Gary Gensler himself. His stance seems almost anti-innovation when you consider how he emphasizes “clear regulations” while simultaneously crushing nascent industries underfoot with vague threats. Pantoja suggests that if Gensler were dismissed from his position, it could clear up so much fog around cryptocurrencies—including XRP—and allow prices to rise freely.

Technical Indicators Pointing Upward

Aside from the symmetrical triangle setup, there are other bullish signals in play here too. For one thing, trading volume around this level is pretty significant—it shows both buyers and sellers are interested at this point in time.

Then there’s also this: Historically speaking, when assets move above their 200-day Exponential Moving Average (EMA), those moves tend to be sustained rallies over time—and guess what? That’s exactly where we are with XRP right now!

Crypto Betting Platforms: An Unlikely Player?

You might not think about it often but crypto betting platforms could actually influence market dynamics too! From online crypto sports betting exchanges to crypto bookmakers offering odds on various outcomes—these platforms aggregate sentiment which can sometimes precede actual price movements.

Reading Market Sentiment Through Odds

Take for instance betting odds; they can serve as leading indicators for future price actions based on collective sentiment displayed therein! If bullish bets dominate across multiple platforms—it may suggest heightened confidence among bettors regarding imminent upward movement (and vice versa).

Summary: Are We Ready for Lift-Off?

With all these factors combined—the technical setup showing clear signs of potential breakout coupled with easing regulatory pressures—it seems plausible that Armando Pantoja’s prediction may not be so far-fetched after all!

Will we see XRP reach $100? Only time will tell—but one thing is certain: As conditions become more favorable along its path forward—watching closely will definitely pay off for those prepared ahead!

Is the XRP ETF Approval Imminent?

XRP ETF approval could redefine crypto legitimacy, impacting DeFi, sports betting, and future US regulations.

21Shares has filed for a spot XRP ETF, and I can’t help but wonder if this is the final nail in the coffin for the SEC’s case against Ripple. If approved, this would mean that XRP is not a security, which would be a huge win for Ripple and Garlinghouse. The ongoing legal battle has been quite something, with Judge Torres already stating that Ripple did not violate securities laws with programmatic sales. However, it seems like both parties are still not satisfied with her ruling.

The Ripple Effect on Crypto Legitimacy

If this ETF gets approved, it will undoubtedly push more people into crypto. Just look at what happened when Bitcoin and Ethereum ETFs were approved; those assets skyrocketed in popularity and price. An approval would also clarify that XRP is not a security, aligning with the recent court ruling. This could pave the way for other cryptocurrencies to follow suit.

The implications extend beyond just XRP’s market standing; it could also impact sectors like decentralized finance (DeFi) and even crypto sports betting platforms. With more regulatory clarity, these platforms might find it easier to operate using cryptocurrencies deemed “safe” by regulators.

Future of Crypto Regulation

The approval or rejection of the XRP ETF could set a significant precedent for future cryptocurrency ETFs. Given how Bitcoin and Ethereum have paved paths for mainstream acceptance, an XRP approval would further solidify this trend.

Moreover, as we approach the US presidential elections, candidates advocating for clearer regulations on cryptocurrencies might accelerate the approval process of such ETFs. It seems almost inevitable at this point.

So here we are: waiting on the SEC while they lose credibility by the day. Will an approval finally push them to let go of their case? Only time will tell.

Blockchain & Cryptocurrency News & Insights | BR.

Who determines a blockchain’s DNA? Who has the right to make decisions, and how is this right implemented in reality? More specifically, what is a blockchain’s system of governance, or “who guards the guards?” Can blockchain technology enhance agricultural supply chains for small business farmers? A look at the issues, opportunities, and projects working to … Continue reading “Blockchain & Cryptocurrency News & Insights | BR.”

Who determines a blockchain’s DNA? Who has the right to make decisions, and how is this right implemented in reality? More specifically, what is a blockchain’s system of governance, or “who guards the guards?”

Can blockchain technology enhance agricultural supply chains for small business farmers? A look at the issues, opportunities, and projects working to ensure the future of agricultural supply chains and small-scale farmers.

Don’t worry about the bear market. As an emerging technology, blockchain is on a typical journey to maturity and mainstream adoption.

There’s No Such Thing As An STO – Blockchain Review

Security Token Offerings (STOs) are the latest hype in the crypto community. Go to any conference and I guarantee you’ll hear one of the following statements. Really? I’m calling BS on all of it. Well, most of it, for now, anyway. To be clear, I’m not anti STOs. I understand they could one day open … Continue reading “There’s No Such Thing As An STO – Blockchain Review”

Security Token Offerings (STOs) are the latest hype in the crypto community. Go to any conference and I guarantee you’ll hear one of the following statements.

Really?

I’m calling BS on all of it. Well, most of it, for now, anyway.

To be clear, I’m not anti STOs. I understand they could one day open up new untapped investment pools, bring more liquidity to the economy, make capital raising easier, faster and cheaper, and provide retail investors access to a new investment class.

That’s all great stuff, but people in the crypto community are running around acting like STOs are a workable, feasible and practical option today. Nothing could be further from the truth.

Hidden in plain sight are major structural challenges which put the viability of STOs and the benefits they are said to provide into serious question. Get ready because in 2019 this delusional STO hype is going to be met by a cold, hard, and highly regulated reality.

What is a Security Token Offering (STO)?

Let’s get on the same page about what we’re referring to here. A Security Token Offering (STO) is a regulated public securities offering of equity in a private company. When conducting an STO, a company issues equity tokens to investors which are legally binding investment contracts that represent the ownership of equity in a company, dividends, voting rights and more.

Rights are programmed into token smart contracts which are designed to enable the automated execution of these rights. This differs from an ICO utility token offering where contributors do not acquire any rights or equity in a company, rather future access to a product or service.

STOs do not beget liquidity

There are many people who seem to think that STOs result in the spontaneous, magic- like emergence of liquidity. In private markets, especially with small and micro-cap issuers, liquidity is very difficult to create. Not only will issuers have a tough time attracting investors but investors will also find their tokens have almost ZERO liquidity.

There are no secondary markets

No secondary markets exist to buy and sell security tokens, and this might not change for some time to come. Well, that’s not exactly true. There is a handful, but they have little to no volume which defeats the purpose of having them in the first place.

The reason for the lack of exchanges is that in most jurisdictions obtaining a license is difficult and compliance is a costly nightmare. Exchanges must adhere to rigorous and continual checks, reporting, KYC and much more. Meeting all the requirements is just too complicated, costly and risky especially when taking into account that several licenses may need to be obtained and different regulation sets adhered to in each and every jurisdiction of operations (national and international).

Traditional stock exchanges like NYSE or NASDAQ are not yet offering securities tokens because they lack the infrastructure for blockchain based digital assets. What’s more, in the US, these traditional exchanges are the only exchanges that enjoy a pre-emption of state blue sky laws. For the reasons listed above it would only make sense to set up a security token exchange on a national exchange or maybe an ATS that offers this benefit otherwise registration is required in each of the 50 states.

Adding to these complexities is the fact that other regulation sets may also apply in addition to securities regulations. For example, an exchange contemplating using security tokens denominated in cryptocurrency must abide by a whole different set of rules which apply to the transfer of cryptocurrency. In New York, this would be a Bitlicense.

With only a few exchanges that feature little to no trading volume, why would any investor want to purchase security tokens? For the possibility that maybe sometime in the future a market will exist with sufficient trading and demand?

There are no liquidity providers

Even if exchanges existed to trade security tokens that wouldn’t be enough to create adequate levels of liquidity. The creation of true liquidity also requires an infrastructure of liquidity providers. This is different to exchanges which can be thought of as trade facilitation platforms. Liquidity providers are the researchers, analysts, and salespeople who call customers to create buy orders to offset sell orders at the point in time they are required. They can be thought of as liquidity matchmakers.

“Tokenizing securities is not a magic recipe for liquidity. Tokens can be equally illiquid as their legacy digital or paper certificates. Tokens do not beget liquidity. Technology does not generate liquidity. Buyers and sellers create liquidity.” – Matthew Finestone

What’s important to understand here is that creating liquidity is a people-intensive endeavor. Doing an STO doesn’t nullify this fact which means that without liquidity providers equity tokens are highly illiquid.

Investor demand is probably overblown

One of the major selling points of an STO is that it enables global access to the holy grail of investors – the unaccredited retail investor. While this isn’t currently true, let’s pretend it is. Is there really a demand for security tokens on main street?

Let’s remember that there is a market today where retail investors can invest in their favorite companies like Apple, Facebook, and Nike quite easily, yet most people don’t. If most people don’t even buy stock in the brands they know and trust, what would have us believe they will buy stock in a small private company they have never heard of?

STOs don’t offer easy access to a global pool of investors

If a project registers and adheres to securities regulations in one jurisdiction it doesn’t mean they can offer their security tokens anywhere in the world or even country-wide. It certainly doesn’t mean that retail investors can be sold to either.

An STO can only be registered and sold in jurisdictions that allow the crowdfunding of equity; otherwise, it’s illegal to do so. When dealing with a security, a company cannot even begin to transact until they have the regulatory licenses and provisions in place in each jurisdiction they wish to operate or qualify for an exemption.

Herein lies the problem. Regulations differ substantially from country to country making for nightmarish and costly regulatory upheavals. For example, most jurisdictions have tough restrictions on who can purchase securities. Tough and divergent regulations make it really difficult and costly to tap into a global pool of accredited investors and, for the most part, put retail investors entirely off-limits.

A US-based example & fragmentation in Asia

If you’re a US-based company and abide by Reg S, a US securities law that allows companies to raise funds in foreign jurisdictions without breaking any US securities laws, there is nothing in this regulation that says anything about foreign securities laws in overseas jurisdictions.

So, yes, while it’s possible to offer tokens in foreign jurisdictions, US-based projects will still need to understand and abide by local securities laws. There is a considerable risk that local laws will be violated by incorrectly assuming Reg S enables securities to be sold to any investors in overseas jurisdictions carte blanche.

There are also grey areas as to what it means to be outside US jurisdiction anyway. Even if you fall outside a jurisdiction, regulations in the US can be interpreted in different ways. For example, having an offshore issuer may not alone mean a project is outside the US for securities law purposes. In a recent case, a court looked at where the validation nodes were located among other things.

In Asia, regulations around STOs are fragmented and dependent on what country you operate in. Like in the US, there are no specific regulatory exemptions tailored to STOs so companies must go through existing securities frameworks or work within exemptions. In Hong Kong, institutional investors can invest in STOs that are registered and compliant with regulations. In Singapore, a strict securities regulatory framework exists supervised by the Monetary Authority of Singapore (MAS) which has its own set of rules and exemptions while in China STO activities are illegal.

It’s a regulatory jungle out there

Claims that STOs offer easy access to a global pool of accredited investors is not true. In fact, the reality may well prove to be the exact opposite for small and mid-sized companies because complying with each jurisdiction will prove way too costly and complex. These costs and complexities lead to risks that startups and even mid-sized companies cannot handle and frankly make the entire STO endeavor not worth it. There is no access to a global pool of retail investors either because regulations in many jurisdictions explicitly prohibit this.

Nobody knows what the future holds but there is no sign of anything close to a global convergence of securities regulations. We’re in the early days, so regulators will be evolving and playing catch up for many years to come.

STOs don’t make fundraising easier and cheaper

Beyond compliance which requires an extensive amount of investor protections, financial reporting, KYC, AML procedures, and other tasks, there are several stakeholders that security token issuers will have to work with such as bankers, lawyers, accountants, exchanges, and custodians (read money sucking intermediaries). These intermediaries do things like underwrite deals and solicit investor interest in a compliant manner.

Companies with minimal funds, experience, and know-how will find it almost impossible to conduct a compliant STO on any sort of scale because the more jurisdictions an STO is offered, the more intermediaries, regulatory complexities, and costs increase.

If this were not enough, there is a lot of regulatory greyness which increases the risks of doing an STO as well. Here’s just one example. Because the tokens offered are regulated securities, does that mean every time it moves on a blockchain it counts as a securities transaction? If this is true, do blockchains need to be registered as some sort of trading venue to facilitate all the securities transactions?

There is also the business side to consider. Who’s going to attract the investors to this new form of investment? What’s the value proposition? STOs are no different from any other method of raising capital in this regard. Companies will have to solicit within the laws and have marketing spend to attract investors in traditional ways. They will have to push a hard sell because most investors will only come when there is true liquidity which doesn’t exist at this time.

Regulatory exemptions don’t necessarily ease the pain 

Companies conducting an STO will no doubt target an exemption to ease their regulatory burdens. Exemptions do offer benefits, but they come with challenges as well. For example, in the US, tokens can be issued under Reg D, Reg A+ or CF. Reg CF caps the amount that can be raised and the amounts each investor can contribute. Reg A brings higher disclosure burdens, and a stricter qualification process and Rule 506 of Regulation D has an accreditation threshold.

Many exemptions also have a lock-up period for up to 12 months which can cause significant challenges for investor liquidity and thus the attractiveness of the investment in the first place. Offering the tokens in multiple jurisdictions also requires qualifying for multiple exemptions which require a deep understanding and the correct navigation of foreign regulation sets.

The point is, offering security tokens come with a whole lot of follow on implications and challenges, whether a project qualifies for an exemption or not.

Technology stacks might be incompatible with regulations

Thus far, for the most part, the majority of teams in the tokenized securities industry are building on top of the Ethereum blockchain as it is the most well known smart contract platform with decent levels of functionality. They are adding layer 2 solutions with different privacy features.

This approach may backfire because these solutions need to work around the limitations of the base protocol which are already built with some kind of concept in mind. Ethereum is an open and transparent ledger which is a problem as confidentiality is often a significant requirement for regulators as well as businesses. The blockchain infrastructure used by a project must adhere to confidentiality and accountability requirements set out in securities regulations to have any chance at offering a compliant STO.

If one of the main goals of putting securities on a blockchain is to take out the intermediaries in the heavily regulated securities market without losing regulatory approval, can this be done with current platforms like Ethereum? Do newer security token platforms understand the regulations? What if they break securities laws, who gets the blame?

Some projects are working on unique blockchain infrastructures to launch regulation-compliant tokens but which regulations will they base their platform on? How will they enable global STO offerings which must comply with different securities laws? How can a blockchain platform adhere to divergent securities regulations and what happens if/when these rules change?

There are also issues about how to regulate and verify a systems-based response to the acquirement of an asset. This is not just about immediate and once off verification. It’s about ongoing compliance and showing this compliance. How will this be built into a blockchain? How will intermediaries and regulators interact with these systems?

With regards to smart contracts, regulators are going to want to know what kind of testing has been done and is this testing being done on an ongoing basis? These are just two of the most straightforward questions surrounding the application of the technology. And what about the question alluded to previously. If a token is a security, does that mean every time it moves on a blockchain it counts as a securities transaction? If this is true, do blockchains need to be registered as some sort of trading venue to facilitate all the securities transactions?

There are simply too many unanswered questions that will take time to resolve. However, it would be reasonable to conclude that projects will need to have the technology stack that facilitates their STO approved by regulators prior to an STO launch. Taking all of these complexities into consideration, do we really think 2019 will be the year of the compliant STO?

A cold, hard, and highly regulated reality awaits

Many proponents of the security token offering fail to consider a seemingly obvious fact. STOs do not exist in a vacuum. Instead, they must fit in with a highly regulated financial world built up over decades. A world that features lots of moving parts, legacy systems, intermediaries and powerful incumbents with vested interests all of which have been designed around these established sets of regulations.

It is precisely these realities, the infrastructure of entangled, technologies, regulations and supporting human elements that make changes, especially significant changes, so hard to realize. And it leads me to my sobering outlook on the viability of STOs in the near term.

“We always overestimate what we can accomplish in one year and underestimate what can be accomplished in 10 years.”

Of course, the existence of these regulatory and technological challenges won’t stop the STO hype train from ratcheting up another gear or prevent investment from flowing in. The crypto community loves a good dose of hype and will no doubt continue to underestimate the cold, hard, regulated reality that awaits.

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Anthony is the head of content and research at Intrepid Ventures. He has spent the past several years researching and analyzing technologies and working with a diverse mix of blockchain companies to help them gain insight and develop authoritative content.

Also published on Medium.