As the Law Unfolds: Crypto & Blockchain
Emerging Tech & Pre-Emptive Policy Education to Drive Adoption Republished from 2018.
Note: Re-publishing a series from Medium, as this may be difficult to read, if one is not on mobile. This series is provided for educational purposes only. Nothing herein shall construe legal, investment, or other financial advice. Stay tuned for a podcast on these regulations sponsored by Lula & CO. & Convex Legal premiering February 20th, 2020. For more information, Click here or follow @Lulaeducate on Twitter
As the Law Unfolds a Series
T’was October 2018, on the verge of one of the most exciting times in the history of policy…
A Dramatic Flair
<Dun, dun, dah….> Cue the dramatic music… Call it a throwback to my days as a small child sneaking out of nap time, as apparently I had fear of missing out (FOMO) at the tender age of 3, and I certainly was not a fan of sleep. Stealthily, I sat peering in on my mom or in some cases babysitter /nanny/whatever the current term today, viewing the latest installment of their ‘shows’ [Soap Operas]. The draw of which was always the dramatic flair. Fast forward 37 years, and the dramatic flair of these same historical relics can be found in the crypto space, where in many cases, the drama within is driven by the enormous amount of passion behind these projects. Yet, passion unchecked can have disastrous implications. This is not always a good combination as legitimacy is sought.
Light Bulb…
What if there were a better way? What if we all looked at the decisions, policy, and legislation through a lens of education, or as Educators cite, capitalize on these ‘teachable moments?’ [1] Would themes emerge? Could we then, create a scope and sequence of the needed etiquette within the industry at the intersection of eccentric and disruptive?[2] A level of decorum would aid in our quest to permeate mainstream adoption so that when actions are called into question, we not only seek a remedy, but add these new pieces of knowledge to the pearls of wisdom, which will then, shape the culture of Blockchain/Digital Assets. In short, crypto has left the rowdy kids table of anarchy and is in a state of transition to the adult table complete with manners and norms, and mores. [3] Ergo, crypto is now a ‘tween.
Adopting a process facilitated through the lens of education provides the level of knowledge that is fundamental to enrichment, in education we call these the critical competencies: i.e., an outline or a checklist of basic understanding. These standards become the core objectives our projects/companies must know. Framed another way this is akin to a Kindergarten teacher allowing the class to create the rules of the classroom. It is one of the most intruiging experiences I have ever encountered, the results would astound you. Further research echos that this constructivist philosophy provides efficacy. [4] Perhaps this first step could offer a small amount of guidance, via…. wait for it… consensus. However, as always, everyone’s situation is different. It is always advisable to seek a competent Attorney or other properly licensed professional advisor well versed in Securities law and digital assets including Blockchain and tokenization.[5]
What to Expect From This Series: Education & Snark to Engage
As a former educator, now advising and consulting within the Blockchain and digital asset spaces. I frequently draw snarky comparisons to better illustrate the nuances of the cryptocurrency space from the likes of Seinfeld, Sex and the City, Borat, and many favorite children’s story books that you may have read in Kindergarten, through engagement. In the event it is not clear, I still should offer disclaimer see above. as this content shall serve to educate generally with a dose of sarcasm, because without that, digital assets and technology may simply be snoringly boring.
However, if you are not following these developments you are sorely missing out, as this is an EPIC time in history, both literally and figuratively. The legislation created today will define how we continue to position ourselves in this dynamic global economy, and as always the case in Fintech, Chicago is the epicenter of this innovation. Chicago? YES! CHICAGO!
Chicago, the Definition of Agility in Action, Navigates Fintech Disruption Like a Boss
Something I had not previously realized is this is not Chicago’s first rodeo with disruptive forces, per se. Cultural shifts within the financial services industry, particularly in the realm of trading, have permeated from the early history of floor runners, through the evolving technology of high frequency and algorithmic trading. Coupling the adrenaline of capital markets with digital assets then leads to the drive to innovate responsibly.
Howey- King of the Castle?
Of note, is despite common misunderstandings, these laws have upheld the test of time to date, albeit there is substantial question whether or not they have the ability to encompass this new Asset Class. The current initial coin offerings (ICO) governing laws are derived from interpretations from the Securities and Exchange Commission (SEC) Regulations, enacted after the Crash of 1929, which had ended the Roaring 20’s dead in their tracks. [6] Now, while it is still unclear what may or may not be deemed a security versus a commodity versus an alternative asset class, to date, there is one standard that is most frequently used. It is known as the Howey Test, and involves…Oranges. [7][8]
‘Orange You Glad…?’
The Howey Test has been under fire in regards to Securities and Tokenization, and will be fully discussed in the next Articles. If you follow this space it may be hard not to cringe at the mere mention of this 1946 decision, which bears significance on what type of investment is allowed and/or what information is disclosed. See, SEC v. W. J. Howey Co., 328 U.S. 293, 66 S. Ct. 1100 (1946). These factors in turn, determine who the investment may be marketed to and how one registers with the SEC, under the laws today. [9] [10]
Resources Consulted:
[1] https://www.sciencedirect.com/topics/psychology/teachable-moment
[2] http://www.ibe.unesco.org/en/glossary-curriculum-terminology/s/scope-and-sequence-curriculum
[3] I read this article in Forbes in December 2018 ish, it was hilarious, I cannot find the article to offer proper credit. However, I love this analogy and use it often. If you are aware of this article please kindly send me the citation. Jenny Balliet
[4] https://www.simplypsychology.org/constructivism.html
[6] https://www.sec.gov/news/speech/spch100704psa.htm
[7]SEC v. W. J. Howey Co., 328 U.S. 293, 66 S. Ct. 1100 (1946); https://supreme.justia.com/cases/federal/us/328/293/
[9] https://www.sec.gov/fast-answers/answers-regdhtm.html
[10] https://www.youtube.com/watch?v=PKSghwS21jQ added January 2020, to better illustrate the changes.
