Coinbase To Support Ethereum ERC20 Tokens

Coinbase just announced it will be supporting the trade of ERC20 tokens.  A lot of times in the crypto world I look and shake my head and I just can’t stop with this one.  I could see if Coinbase wanted to support actual currencies like Ripple, Lumens, Monero etc… those are reasonably safe currencies to invest in.

ICOs which are essentially crowdfunding/pseudo-stocks (depending on who you ask) are extremely risk and I would say about 90% of those are fraudulent in that they collect your coins and never intended to deliver anything.  I think we can all agree at any rate that ICOs are extremely risky and HODLING may be as useful with those tokens as holding RIM stock.

Coinbase has a huge client base and is one of the easiest ways for people to get into cryptocurrency.  However, they risk bringing regulatory wrath and also dampening new investors from coming in when they get burnt on these ICO scams.

It’s recently come to my attention that some people weren’t aware that Ethereum Smart Contracts or ERC20 tokens are not vetted, supported or approved by the Ethereum team in any way.  This is  huge issue of course and why I am so against smart contracts at the moment.  Let’s get cryptocurrency as an infrastructure in terms of B2B,B2C,C2C etc… working fast, efficiently, securely and easily before biting off more than we can chew!

I am also at a loss as to how the Coinbase legal team approved this one?  Did they run it by any counsel at all?  I think if and when people lose massive amounts that Coinbase could be held liable regardless of waivers and disclaimers for losses in some of the huge ICO busts and scams to come.  Especially when there are so many other avenues and stable currencies they could have directed their customers to.

I am fearful for the investors, for Coinbase and the cryptocurrency market as a whole but should these warnings go unheeded and “things go terribly wrong” then it would be a good, fresh start for the industry.  Investors also need to do their diligence and exercise good understanding and judgement before making investment decisions.

It will be interesting to see where this leads but I would never recommend any friend or family member to invest in any Ethereum Based Token ICO and to stick with solid and real cryptocurrencies that solve the problems of today.

How Governments Should Handle Crypto and ICOs

First of all after seeing so much confusion, panic and misinformation in the news, it is about time each country made a dedicated website for cryptocurrency.  The winners will be the countries who clearly communicate their policy, laws and intentions on handling cryptocurrencies.

Now in all fairness things are moving so fast, governments have genuine reason to fear cryptocurrency (aside from illegitimate reasons…) with most ICOs being absolute scams.  The real reason is of course is that governments can no longer vote or control who can fund themselves, the internet and public will judge.  However, there are still good reasons to have regulation or at least accountability so ICO fraudsters cannot hide overseas and disappear with the coins they collect.  This is my position where I feel the majority of token ICOs have no intention of completing their projects.

Getting back to what government should do, it’s not only ICOs but also the laws surrounding the purchase, use and trade around cryptocurrency.

The first country(s) to make fair, easy and favorable laws surrounding ICOs and cryptocurrency may find itself literally walking into digital gold and could be the next Hong Kong or Singapore of the crypto-finance world.  It’s up for grabs until countries clarify and cement their policies with crypto.

The first step if I were a regulator would be to hold public consultation and establish a staterun/government website domain to encourage discussion.  I also imagine it will be a hard case for government going after their citizens or businesses because they could simply leave the country with their crypto.  I think this is one element that business and government doesn’t like, that they can no longer control what people do with their money.  Typically governments and banks work hand in hand to achieve specific goals but with cryptocurrency, much like the world-wide web (initially) they are trying to find a balance and also ways to reign in control.

This time is very different, there is a lot at stake for governments, banks, people and business.  If a government moves too aggressively against the crypto world it could find itself sidelined and in financial ruin while their citizens and businesses will flock to countries that treat them better.

One of the first known examples of staterun conspiracy to harm cryptocurrency is Poland’s recent Youtube campaign: https://cryptoslate.com/polish-central-bank-caught-funding-anti-cryptocurrency-youtube-campaign/. They can’t be the only one and we know because of the well-timed press-conferences from various countries that threaten to ban ICOs or the currency outright.  On that note, as an investor this gives me more confidence than ever.  If crypto isn’t a big thing, then governments wouldn’t be talking about it.  The fact they warn so much about crypto suggests that governments and banks are well aware it is here to stay.

It could be that some governments are just playing games and waiting to see how things play out.  Perhaps internally if they see their attacks on crypto don’t kill it then they’ve already accepted that they will stop the fight against crypto.  Personally I think they are well aware that they cannot stop it and are maybe buying time so they can launch their own like Japan, Russia and China have announced.

I don’t think there’s a direct comparison but this standoff reminds me of the anti-piracy fight.  It used to be a fringe and underground element, but with crackdowns it actually has become more prevalent and easy for people to engage in piracy. Don’t get me wrong, crypto is not at all illegal or wrong (as compared to piracy) but the governments are essentially treating the crypto world the same way.  Much like the rule of investment after your strategy fails, trying again “won’t be different this time” I believe.

What do you think, how can governments handle crypto better and how would you react to bans and other aggressive action against crypto and related businesses?

Countries where cryptocurrency, coins, tokens and ICOs are banned

There has been a lot of activity lately in the world with governments banning cryptocurrency and ICOs but this should come as no surprise as there has been strongly worded messaging about this for some time.

China bans ICOs and shuts down Exchanges
This had a massive impact on the valuations of coins such as Bitcoin, Litecoin, Etherum, Dash etc.. but things have since recovered since the 2017/09/04 law passed in China but serves as a warning and example of what government intervention can and cannot do.

http://en.people.cn/n3/2017/0904/c90000-9264331.html

Chinese authorities on Monday ordered a ban on Initial Coin Offerings (ICOs), a nascent form of fundraising in which technology start-ups issue their own digital coins, or “tokens”, to investors to access funds as the rapidly expanding market spawned concerns over financial risks.

Starting Monday, ICO activities should be halted, and ICO platforms should not engage in exchange services between fiat currencies, virtual coins and tokens, said a statement from the People’s Bank of China.

South Korea Bans ICOs

The good news is that while ICOs are banned it does not appear that trading in the currencies themselves is banned.
http://www.nasdaq.com/article/south-koreas-ico-ban-a-reaction-to-serious-concerns-over-cryptocurrency-investment-practices-cm854236

In fact it appears South Korea plans to allow trading but wants more regulation and safeguards:

South Korea Makes it Legal to Transfer Cryptocurrencies Internationally

Singapore

Although not by law, many companies in Singapore dealing in cryptocurrency have had their accounts closed:

https://www.out-law.com/en/articles/2017/september/singapore-banks-closing-accounts-of-cryptocurrency-firms/

Countries subject to strict or promising strict regulations

Nearly every country has taken a similar line where they are making a legal framework and claiming that ICOs are subject to the same laws and rules as IPOs. However this doesn’t appear to have been translated into law. It also doesn’t address the question of how holders on the coins will be impacted but one would guess that in the future they may be subject to capital gains tax and treated like traditional stock investments.

This list of countries includes:
EU, Hong Kong, Canada, Singapore and many other countries around the world.

Hong Kong Regulators Warn ICO Tokens May be Securities Under the Law

SEC: ICO Tokens Like Those of The DAO are Securities Subject to Regulations

Canadian Regulators Say Cryptocurrency ICO/ITO May be Subject to Securities Law

Is the regulation valid, practical and legal?

This is a hard call for me to understand in the sense that these cryptocurrencies are just that, digital currency and currently people are not taxed or penalized for simply exchanging, buying and/or holding different currencies.

It may also be interesting to see what the large exchanges, businesses and users do in response such as unprecedented regulation and laws. It may be that some of the regulations and laws imposed around the world may be found invalid or unenforceable in the end.

What are your thoughts and as always please let me know if I’ve missed any new developments around the laws of cryptocurrency.