The Breakdown - Crypto Daily 3@3 - 7.11 | Comply or Die Token Sales | Turkey and CBDCs | Crypto Startup Studio

Episode Date: July 11, 2019

On this episode, we discuss: 1) Reg A+ compliant token sales from Blockstack and YouNow and why it's becoming comply or die; 2) Turkey planning a central bank digital currency and how the crypto market is trifurcating; 3) IDEO's new crypto startup lab.  Follow on Twitter: @nlw Watch the video version on YouTube: https://youtube.com/nathanielwhittemorecrypto

Check, check. All right, let's do this. So I got a little something weird today. Welcome back, everyone. Hello again. So a few things. First, audio should be a little bit better than yesterday. Yesterday was kind of tweaky. I think we've got some of the settings fixed. So hopefully this works better. We'll keep trying to perfect it. Two, Twitter is down right now. Like seriously down, entirely down, down, down, down, down. So I'm actually recording this and I'm going to just push it live. later. So sorry for anyone who's commenting. Maybe I'll try to hang out in the comments when this is going on. Three, I'm going to try to do something each day where I do a little bit of a recap if there's any relevant news from the day before. So yesterday we talked a little bit about Libra going to Washington and how that kind of regulatory political work has now begun. And so we got more color about Jerome Powell, the Fed Chair's testimony. And it was interesting. They asked him directly if a cryptocurrency were to become prevalent throughout the globe, would that diminish or remove the need for reserve currency?

And this is Alex Kruger, Kroger, Kroger Macro. For those of you don't know, is quoting Powell, things like that are possible, but we haven't seen widespread adoption. If we do see it, you could return, you could see a return to an era in the United States where we had many different currencies in the so-called national banking era. Pretty interesting, right? And then the kicker, this is the one that I think got people most excited. Almost no one uses Bitcoin for payments.

They use it more as an alternative to gold. It's a speculative store of value like gold. So that narrative is clearly hitting. And I think there's a lot you can argue that that's a good thing when it comes to whether how Bitcoin is insulated from maybe regulatory intrigue. So that's pretty cool. We're going to keep an eye on that. But let's move on to the 3 at 3 today.

And we are starting with pretty big news from the world of compliant token sales. So Blockstack announced last night that had received the first ever SEC qualified token offering. So they used a Regulation A plus tool that the SEC offers, which is basically a kind of a distributed crowd sale type model. I think it's up to $50 million. It was designed to allow non-accredited investors to participate in investing activity, right? And so Blockstack has done a ton of work to get this actually working for them. So just looking through the announcement, again, the key thing here is this question of who gets to participate. So under the SEC Regulation A Plus framework, Blockstack will conduct a $28 million cash offering.

It will be open to any purchaser who would like to take part in it subject to a small number of geographical restrictions. This means everyone from general enthusiasts to long-standing blockstack supporters to accredited and non-accredited investors alike in the U.S. and globally can participate in the sale. So this is really big, I guess, on the level of, as we see companies like finance and Polo and a bunch of others pull out of the U.S., you have Blockstack who's creating kind of a legal path for retail investors, not just accredited investors, but retail investors to participate in a token sale. pointed this out he said here we go block stack just approved told the first regulated token offering finally non-accredited investors can participate you have

Catherine Wu who points out just how much work this is this might have been anywhere between one and two million dollars of funding or just in legal fees to get that that compliance you have just a lot of different reactions that are pretty excited you did have some people who are kind of less excited right so you have folks like Matt O'Dell who are imagined congratulating someone for getting regulatory approval to dump their worthless centralized token on retail investors. So that's the kind of the set of folks who aren't excited tend to be just kind of down on tokens in general or they're wondering what the deal for retail investors is. So Gabor who works on Bitcoin ETFs and is well known for that

over at Van Eck pointed out that those retail investors are going to have to pay a multiple from earlier sale holders. This follows the pattern of any time basically retail investors get to tokens though, right? And I think that a lot of the folks who are arguing, you know, that this is a positive, as you can see here, at least it's transparent. ICOs didn't even do that. It's a step forward. So, you know, that's kind of one take. And then interestingly, right after this news came up, Catherine Wu points out again that at actually another company props or you now rather so you now for those of you guys don't know the live stream video chat service they've been around for a while actually but they have a props token and it was the second project to be kind of compliant under this reggae

so Chris Berniske called this out Catherine Wu pointed this out and it's clearly showing that we're kind of in a phase where the lack of clarity on the part of the SEC about whether there are going to be different types of rules for token projects is causing the projects that are trying to be compliant to have to go to extreme lengths to do so, right? You're talking about millions of dollars of compliance fees or of legal fees trying to get that compliance and, you know, kind of pretty strict regulations on what's going to happen next. So I think that the takes that are worth just kind of keeping in mind, you know, outside of just the excitement that there is a different model that we're going to see live in the wilderness and see how it

works. Two takes that I thought were really interesting. So you had Jake Trevinsky, who said, we've overcome the hurdle of whether the SEC will approve crypto reggae filings, but we've yet to see if there's an actual market for regulated tokens. I'm excited to see how this turns out, but I'm skeptical that reg A plus works long term for projects of meaningful size. Drew, propel forward makes it a little bit clearer. A few thoughts about BlackSack getting its A-plus approval and cleared for sale. Approval sets up the best market test we've seen in crypto about whether the fat protocol thesis and to test if legal access to closed network payment instruments are marketable. So what he's really getting at is this point. ICOs did in the unregulated and under-regulated

world. So this sets up the question, do ICOs that are to be used as payment instruments on closed-market environments only have value because they can be pumped and dumped on unregulated exchanges, Or, as in this case, where there are no frictionless or friction light exchange facilities available, do they have value because people want to use or expect, or because people want or expect to use them? So the point that he's making is that because you're not going to see these stacks tokens and the props token flowing across unregulated exchanges in the same way, because there are going to be kind of more restrictions around them,

you're going to really get to see whether they have value because people actually want to use them. And that's a really important test for this market. So that'll be interesting to watch. I'm certainly going to keep an eye on it. Sorry for going a little bit long on this one. I just think it's a pretty notable moment. And so I wanted to give it its proper due. But let's move on actually now to number two.

So I woke up this morning I saw David Nage, who's over at ARCA, posted Turkey with GDP of $850 billion, is now developing its own digital currency. The 11th development plan from the presidency of the Turkish Republic stated that the blockchain-based digital central bank money will be implemented. So this comes from, let me see if I can find it. Yeah. So Coin Telegraph posted an article. Turkey put central bank digital currency on new economic roadmap. That came out, I think, a couple days ago and just kind of found its way into the news recently. Pomp tweeted about this this morning. Countries known to be developing their own central bank digital currency, China, Turkey, Uruguay, Bahamas, Sweden, Ukraine. Eventually, every country will be in the game. I think that the interesting point about this is where this fits in the overall,

the overall kind of idea of cryptocurrencies, right? Like, how exciting is this? And what does it mean? Because on the one level, it's clearly interesting, right? It's technologically interesting that there is this new, currency paradigm that's that's being developed. On the other hand, it's, there's a very different phenomenon than, um, than permission list networks, right? Uh, so I think that there's really interesting, uh, tweet that I saw that I think encapsulates this. China, Turkey are working on a

national digital currency. I bet that in five years, three types of digital money will coexist. Open source decentralized cryptocurrencies, digital fiat currencies, corporate currency. Um, And I think that that's kind of true, right? You're seeing this, not bifurcation, I guess, trifurcation in the market of, on the one hand, you've got these sort of permissionless currencies like Bitcoin that are operating outside and around the normal structures. On the other hand, you've got these sort of digital fiat currencies, which are starting to emerge. And then on the third, you've got obviously these kind of corporate coins like Libra and JP

coin. And I think that this is going to be the paradigm that we're in. And it's important and it's going to be important to understand how different these are, how they function differently. I mean, this is like the Coin Center report that we saw a couple days ago about the differences between Bitcoin and Libra are effectively pointing this kind of making the contrast clear. And this really matters particularly in understanding which of these are tools for surveillance versus tools for freedom and liberation. And it's totally possible that all of these paradigms can exist in the same world, but they're going to function really differently. to keep an eye on just how different they are. So that's something I'm keeping an eye on. Every time that we see a new CBDC, it's worth keeping an eye on, I think. And so that's why I

wanted to share this. I'm not necessarily optimistic that these are really good updates until Bitcoin gets a little bit more kind of anchored in the larger ecosystem in the mass market, but it's happening, whether we like it or not. that will move on to the third and final note for today. All right. So IDEO has launched a crypto startup studio. This is interesting. I think I just wanted to mention this quickly. I saw a ton of people chattering about it in part because I think a lot of different companies are involved. So partners Amazon Deloitte Fidelity, Crypto Data from Masari, Ethereum Foundation, Stellar Foundation, all kind of helping build an incubator idea, IDEO co-lab. So IDEO for those of

you don't know is a really famous design studio. They've been involved in some of the most famous consumer products in history. They had a long relationship with Apple. They've been interested in crypto and kind of involved with crypto for a while now. And the startup studio is, it's not an accelerator necessarily like something like YC, where they get equity or anything like that. It's free to participate. And it's basically just they're trying to give them lots of resources. And so I think that there's a couple things that I thought were notable about this. I'll throw up some of the folks from IDO posted about it as well. So you had Dan and you had Ian posting a little bit more about it.

I think that what they're trying to do, at least in my sense, is just continue to provide resources to up the quality of projects as a whole. And so to the extent that there's a common thread between this news and maybe like the block stack news, what we're seeing is a shift from projects that are really kind of like spun up overnight in order to capitalize on, you know, aggressive retail investor demand to projects that are thinking long-term, thinking bigger, not necessarily just thinking about tokens, although some might be, but also just trying to build the infrastructure and kind of applications that the crypto ecosystem needs to function as a whole. I think that's a positive thing that net. I think that that's why

maybe we're not seeing so much, quote-unquote, alt season happening right away because, you know, I mean, and maybe this is a little bit of wishful thinking, we've moved on from the strictly pump and dump trade. What's the next Bitcoin? Let's move fast. What can we hype kind of mentality that characterize the 2017, early 2018 boom into something that's a little bit more long horizon. Again, that could be overly optimistic, but the whole point about narratives is you're trying to will things into existence. So that's what I'm going with. So anyways, friends, sorry for not being live today. This is a weird one. But hopefully, hopefully, hopefully you get to enjoy this anyways and I'll try to hang out and we can chat while it's going on. We'll have a little watch party.

Anyways, thanks for hanging out as always and I will see you tomorrow.