😤 ICOs or bust

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It's Monday morning and we're back! Last week, we spent some time exploring what the rest of the cycle might look like. 

Another reason that this time is different: Crypto has never been in a bull market with an agreeable SEC.

How wild this cycle might’ve looked without Gensler at the helm for the first half. 

Maybe there’d be no airdrop meta flooding the market with low-float, high-FDV tokens. Could Ethena, Ether.fi, Jupiter and even Zora have been ICOs instead of airdrops? 

Could they have made investors huge profits that would be cycled into ETH and SOL, driving them to much higher all-time highs — and even faster?

— David Canellis

🏆 Crypto Mom and Holy Grails

Don’t get me wrong. Having a securities regulator back off on stuff like ETFs (bonus points for in-kind redemptions), liquid staking and staking-as-a-service is grand. 

But ICOs are the Holy Grail for the crypto space. The job’s not finished until they’re back. 

Hester Peirce, the SEC Commissioner who was earlier to crypto than practically anyone at the agency, is acutely aware that financial accessibility is at the heart of what makes crypto “crypto.”

“Obviously I’m someone who believes very strongly in the dispersion of knowledge across society, and in the fundamental value of every human being, and the ability of every human being to contribute something unique to society. And I think that concept really links up very well with crypto,” Peirce told Yano on today’s Empire podcast.

“[Crypto] is trying to bring the ability of people to engage with one another, peer to peer, and really to draw on people who society might before have shut out. If you have a centralized intermediary, what happens is that that intermediary — either of its own accord or because the government tells it to do so — shuts certain people out.”

We already know that the answer is open-source protocols that “anyone can access and use on the same terms as everyone else,” as Peirce put it. And we already have them. 

Still, freedom of access does not come with freedom of consequences for offering token sales to US investors. At least, until the SEC finalizes a clear framework for token sales. 

“I mean, the goal is to get a framework in place that would allow people to do ICOs, to do airdrops, in a way that they understood was compliant with the securities laws, and then I think you would see that kind of thing happening here, so that certainly is why we’re working expeditiously to try to get something done,” Peirce said.

OK, but what will that framework look like? Crypto Mom didn’t go into detail, but some of her comments earlier on in the podcast might hint towards where it’s going:

“The definition of ‘security’ is very broad. We think often of just stocks and bonds, but you also have investment contracts which are intended to capture anything where someone says, ‘Hey, give me some of your money. I'll take it, pool it with other people's money. You don't have to do anything. I'll do all the work and you'll get profits based on the work that I do.’

“That's something that investment contracts were designed to capture. And that's how a lot of these token-distribution events look an awful lot like investment contract transactions. And so trying to figure out: ‘Okay, then, the token was sold as part of that transaction, but it doesn't always carry that investment contract with it. How do we think about how long the obligations of the person selling the token should last to the people buying it?’ That's really what we're wrestling through.”

To me, the most telling part was that Peirce zoomed in on the SEC’s mandate to capture “the capital raising transaction” when regulating digital assets, “but not saddling the token with securities laws for the rest of its life.”

Compare that with recent comments from SEC chair Paul Atkins, when he said that “there are very few, in my mind, tokens that are securities, but it depends on what’s the package around it and how that’s being sold.”

Something tells me that Atkins might consider many more tokens to be securities had the low-float airdrop meta never taken hold — and those airdrops were ICOs instead. 

At this point, it could be another few years until token launches are considered safe enough to really proliferate. Just in time for the next bull market, I guess.

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• ETH/USD reached a high of $4,946 on Sunday before retracing around 8%. Current price: $4,600.

• Galaxy, Jump Crypto and Multicoin are teaming up to raise $1 billion to buy solana, reports Bloomberg.

• The LayerZero Foundation has won a four-way bidding war to acquire cross-chain protocol Stargate for $110 million.

The next batch of crypto ETPs will be built different.

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