Category Archives: Bitcoin

Facebook’s Cryptocurrency

Facebook just announced a Facebook cryptocurrency called Libra.

To me, the timing seems poor. Over the last year or so, Facebook has suffered one public relations black eye after another regarding its privacy policies, it compliance with an order of the Federal Trade Commission, its role in disseminating conspiracy theories and election interference, and its dominance in the social media industry. A Facebook cryptocurrency will, by definition, give Facebook even more private information and even more financial power. Already, regulators and members of the public are shouting “No!”

A few thoughts about what this means:

  • Not long ago, some predicted that cryptocurrencies would lead to a better world, a world that would be more free, more decentralized, where consumers could interact with one another without middlemen. Libra, a cryptocurrency created by one of the most powerful companies in the world, seems to promise exactly the opposite.
  • It didn’t take long to get from idealism to disappointment, but the arc itself is typical of technologies, from radio to automobiles to the internet. We expect technologies to save us, then they don’t.
  • Are tokens securities? Does Howey apply? Facebook’s announcement shows that those questions are small potatoes in the scheme of how cryptocurrencies may re-shape the financial world.
  • Undoubtedly, Facebook is in this for the data. Will consumers care? Probably not.
  • Facebook might be first, but how long can it be before Google and Amazon — especially Amazon — issue their own cryptocurrencies?
  • Regardless of political persuasion, governments aren’t going to allow Facebook or anybody else to compete with their national currencies. We are already seeing opposition from Democrats and Republicans alike, and we can expect more.
  • And the next step: How long can it be before the U.S. dollar itself is given the features of a cryptocurrency, in effect competing with Facebook?
  • The price of bitcoin increased on the announcement, but I think that’s exactly wrong. The announcement shows that bitcoin and other cryptocurrencies will be left behind as big companies take over, just as a few big companies now monetize the once-egalitarian internet.
  • In the same way, I expect the announcement to stifle innovation in the cryptocurrency industry generally, just as the existence of Facebook already stifles innovation in social media and Microsoft once stifled innovation in software. Nobody wants to compete with the giant.

As all six readers of this blog know, I’m a believer in Crowdfunding from a capitalist, ideological perspective. I believe in making capital available to entrepreneurs everywhere, no matter where you grew up, no matter who your parents are, and in making great investments available to ordinary Americans, helping to narrow the wealth and income gaps that do so much harm to our society.

Frankly, Facebook and Libra feel like a step in the opposite direction, toward a world where knowledge and wealth and power are more concentrated and ordinary Americans are so many data points to be monetized. I’m certainly interested in hearing a different point of view.

Questions? Let me know.

Mark Roderick is one of the leading Crowdfunding lawyers in the United States. He represents platforms, portals, issuers, and others throughout the industry. For more information on Crowdfunding, including news, updates and links to important information pertaining to the JOBS Act and how Crowdfunding may affect your business, follow Mark’s blog, or his twitter handle: @CrowdfundAttny. He can also be reached at 856.661.2265 or mark.roderick@flastergreenberg.com

The Bad News About ICOs Is Good News

Every day brings more bad news about ICOs: another class action lawsuit, another subpoena by the SEC, another “request for information” by a state Attorney General, another country that outlawed ICOs altogether.

The bad news is probably hurting the industry’s reputation and driving away investors in the short term. But from my perspective the bad news is, on balance, actually good.

The ICO market was crazy in 2017. Lawyers were giving questionable advice, investors were buying anything called a token, and the billions of dollars sloshing around attracted bad actors and instant-millionaires. People convinced themselves this was normal and justified, as they did with tulip bulbs in 1636.

From my perspective, the bad news in today’s headlines shows that the fog is clearing. Among the lessons learned:

  • ICOs were not, after all, a law unto themselves.
  • It’s easier to describe a network than to build one.
  • Some smart contracts are dumb.
  • Honesty is still the best policy with investors.
  • An honest cop is good for the neighborhood.
  • The laws of economics have not been repealed.

Most important, it turns out that there really is value in blockchain, even without the hype, and that real entrepreneurs are building serious value and finding it easier to connect with investors as the fog clears. Your Uber driver is no longer offering tips on Bitcoin, but you can do a legal ICO, there really is such thing as a utility token, and there are a lot of really smart folks building real companies that are going to disrupt and transform a lot of industries.

We’re going through a much-needed adjustment right now. It’s all good, as we young people say.

Questions? Let me know.

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