Mikado CEO: Eventually All Coins Will Be Securities, Undermining Crypto's Ethos

This is an excerpt. To hear the full interview, please click on the Soundcloud or Youtube links.

At the present moment, Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term is a huge topic within the cryptosphere. The world’s largest economies and most powerful governments don’t all see eye-to-eye about what kinds of regulations should be put in place. China has taken a firm anti-crypto stance; the United States governments has sent out mixed messages.

Recently, Finance Magnates spoke with Andrey Nayman, Founder and CEO of Mikado, about the practical aspects of what cryptocurrency regulations will mean for blockchain firms and their investors.

”An Important Part of Any New Industry”

Nayman said that he believes that widespread adoption of Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term technology won’t be possible under the popular regulations are in place. “Regulations are an important part of any new industry.”

However, “regulators are always coming late to the industry,” he added. “Right now, every investor in [each blockchain project] doesn’t have any particular rights. The main role of regulators is to protect investors and contributors.”

Nayman differentiated between the terms ‘investors’ and ‘contributors’--according to him, the term investor implies someone who has bought into a traditional industry who has a certain set of rights. However, the term ‘contributor’ in this context implies that a far less strict set of rules applies to the situation.

“The Ethereum ICO was registered in Switzerland with a Swiss company. Every company in those days was organized as a foundation. In a foundation, you don’t have investors, because these companies are not for profit. You have to organize people who put money into the company under one term: contributors.’”

Do you believe that #Bitcoin will hit $50,000?https://t.co/OROyAA7LDM pic.twitter.com/HPttBRX8oc

— Andrey Nayman (@AndreyNayman) ٥ يوليو ٢٠١٧

“The contributors contribute to the success of the project, and [are not legally entitled] to earn money from their contributors. This was the beginning of the term ‘utility token’: you contributed to the project, to the foundation; the foundation will bring an open-source solution to the market, and in case the foundation will successfully distribute their solution to the global market and the world, you probably won’t enjoy from the fruits of the tokens.”

”The US Makes the Rules”

“Right now, there’s no way to use these terms to protect yourself [from the point of view of the foundations],” Nayman continued. “The role of the regulators in any financial market is to protect investors (and most importantly non-professional investors) from losing their money. So, the companies need to disclose information about the company itself, and they need to protect contributors. In the future, I believe that this term will disappear and be universally replaced with the term ‘investor’ because all tokens will be recognized as securities.”

Nayman went onto say that while these regulatory changes will eventually be adopted globally, the US will probably be the deciding force. “The United States dictates the rules most of the time...the position that the United States takes on the blockchain economy will significantly improve the understanding of the global market.”

”All Tokens Will Be Securities”

So, which regulatory direction will the US head in? “I think the US will definitely declare all ICOs as securities, and not utilities…there are a lot of examples of [so-called] ‘utility tokens’ not really being utility tokens.”

“With a utility token,” he continued, “you don’t really have anticipation for future growth of the token price. If you do anticipate growth of the price, it’s probably not a utility anymore. With any project that is listing its tokens with exchanges--and yeah, for sure, we need these exchanges to change one token for another--but mainly, we are anticipating incremental growth of the price. So, it’s not a utility anymore.”

However, Nayman explained that the classification of could restrict the realization of the borderless, ‘global economy’ that so many blockchain enthusiasts have envisioned for years. He explained that if and when all tokens are labeled as securities, rules about contributions “will become much more strict about jurisdiction. There is no global concept.”

“The good thing about blockchain is that it’s ‘open-borders’; you can actually create a worldwide economy...treating tokens as securities is severely limiting these capabilities in terms of regulation.”