
Our path to listing SEC-regulated crypto securities - troydavis
https://blog.coinbase.com/our-path-to-listing-sec-regulated-crypto-securities-a1724e13bb5a
======
koolba
> If approved, Coinbase will soon be capable of offering blockchain-based
> securities, under the oversight of the US Securities and Exchange Commission
> (SEC) and the Financial Industry Regulatory Authority (FINRA). This step
> forward is being made possible by our acquisition of a broker-dealer
> license, an alternative trading system license (ATS), and a registered
> investment advisor (RIA) license.

> ...

> This is all being enabled by our acquisition of Keystone Capital Corp.,
> Venovate Marketplace, Inc., and Digital Wealth LLC.

If I’m understanding this correctly it’s very impressive. They were able to
acquire existing companies with those licenses and convince the SEC to let
them retain and expand them to cover the entire business. It’s like the
reverse acquisitions of small banks to enable a new player into the tightly
regulated bank market (which is an incredible pain to get new approval for),
but now applying it to crypto.

~~~
JumpCrisscross
This is relatively standard practice in the broker-dealer space. (It’s how I
started my first company.)

~~~
thisisit
Interesting.

Slight off-topic looking at your profile, it says "Trade private equity stakes
in technology companies". Curious how does that work?

~~~
JumpCrisscross
What is your e-mail address?

~~~
komali2
Will one of y'all just post whatever this person emails you?

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anonu
>> This step forward is being made possible by our acquisition of a broker-
dealer license (B-D), an alternative trading system license (ATS), and a
registered investment advisor (RIA) license.

Great sentence in the press release. My thought was that someone (obviously
would be Coinbase given their massive amounts of funding) was out looking for
a BD. But they went a step further with the ATS and RIA licenses.

Coinbase is, in some sense, "backdooring" their way to becoming regulatory
compliant in the US. That's fine - its a way of jump starting the process.

What it ultimately means is: 1\. more legitimacy for crypto as they are now
regulated by the FINRA and the govt (SEC) 2\. If Crypto continues it slow rise
- every BD and ATS will get into the game. So expect some realignment in this
space.

~~~
dd36
I wonder what the account requirements are for a BD. Will they have to deny
services to foreigners and kids?

~~~
anonu
I do not believe there is any US regulation that denies brokerage accounts to
foreigners or minors. If they do, it may be an independent decision by
brokerage firms simple because they don't want to deal with the extra
paperwork.

Being a BD means a whole ton of paperwork, compliance and regulation. You have
to abide by KYC and AML rules (Know Your Client and Anti-Money Laundering).
People in charge of accounts need to become registered reps and take 1 of the
Series Exams administered by FINRA. I imagine there will be some changes to
incorporate crypto into the licensing.

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yani
Buying ... expanding... when they cannot reply to a support email for more
than a month. This is one of the most customer unfriendly companies.

~~~
novalis78
Try six months on funds they made disappear from open orders. Even their own
reports show the missing funds - still, support slow as a snail. The exchange
space needs more competitors, but it looks like you need bank level funding to
pull that off.

~~~
jstanley
At that point I'd suggest it's not support you need to be talking to, it's a
lawyer.

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gomox
This a great step in the right direction for the post-ICO-craze phase. Once we
are over the bullshit utility tokens we can go back to building valuable
companies with a whole new way of funding them.

~~~
aphextron
>we can go back to building valuable companies

Like what?

>with a whole new way of funding them.

What's wrong with US Dollars?

~~~
gomox
Crypto securities don't replace the US dollars. They replace the shares you're
buying when you invest in a company. You are welcome to use US dollars for
that if you want. Chances are depending where the companies are based, getting
the money in USD to them could be tricky though.

What company people are going to build is anyone's guess, but mine is that
there's going to be a lot of them. Silicon Valley is only but a small dot on
the face of the Earth. A lof of potential is going to be unlocked.

~~~
pjc50
Shares provide ownership and voting. Tokens provide .. no legal guarantees of
anything at all?

~~~
gomox
Not all shares provide voting, as I'm sure you are aware of.

But essentially, the paper the shares are printed on doesn't provide any legal
guarantees by itself either. The fact that ownership is tokenized doesn't
prevent companies from issuing guarantees to token holders.

See my comment on the comment next to yours for more:

[https://news.ycombinator.com/item?id=17255832](https://news.ycombinator.com/item?id=17255832)

------
wmf
This sounds great until people realize that only qualified investors will be
allowed to trade security tokens.

~~~
icothrow3
Social network Gab is attempting to issue security tokens [1] under Regulation
A+, which allows the general public to invest. The SEC hasn't approved it yet.

[1] [https://www.startengine.com/gab-select](https://www.startengine.com/gab-
select)

~~~
atomical
People here hate Gab and its founder. He's quite unpleasant. Expected to be
downvoted into hell.

~~~
s73v3r_
Gab and it's crowd are quite abhorrent, but I don't think most people here are
going to care about the mention that they're trying to do a token.

~~~
atomical
He was kicked out of HN. You underestimate how petty the mods here can be.

~~~
s73v3r_
I don't think kicking the guy behind "Twitter, but for White Supremacists" is
petty. But I also don't think that the mere mention that they're doing a token
in a comment is going to be that harshly dealt with.

------
hendzen
If all of AAPL stock is tokenized, and someone hacks a custodian of say 30% of
AAPL, is the hacker now owner of 30% of AAPL?

~~~
ISL
The hacker would suddenly discover the various international justice systems.

The tokens would be tainted, unspendable, and worthless.

A wild guess at the potential reward for unmasking the hacker? ($950B * 0.3 *
0.001 --> ~300 M USD).

After the first such hack, companies might add a clause to the bylaws enabling
the company to re-issue stock to the aggrieved party, restoring balance to the
universe.

~~~
mrep
> The tokens would be tainted, unspendable, and worthless.

No they wouldn't because the whole "decentralized system" makes it so you have
to get EVERYONE to agree to blacklist those tokens BEFORE THEY ARE TRADED or
else it fails because the hacker can tumble those tokens across dozens of
different cryptocurrencies on every exchange across thousands of accounts. You
will never be able to hard fork every cryptocurrency for 1 mistake.

The only hack that I have ever heard of that was successfully reversed was the
DOA and that was because they had 30 days to work out a hard fork on 1 wallet!

Cryptocurrencies are good for one thing only and that is blackhats.

~~~
ISL
It only takes a few countries imprisoning people who trade in tainted
coins/tokens before they become untouchable.

Public ledgers are public. If the US IRS, perhaps coordinated with Interpol,
publishes a blacklist of coins, those coins are toast.

~~~
Felz
Uh, so wait. If the IRS/Interpol becomes an effective source of truth on which
coins may be legally transferred and who rightfully owns them, what was the
point of the blockchain?

~~~
ISL
We are all going to find out.

At the very least, the blockchain provides a degree of global immutability
that was previously impossible.

~~~
mrep
That immutability is terrible feature. Type one letter wrong on your wallet
address and your money is gone forever.

I myself have experienced something similar when a bank teller provided me
with a routing number from a chase bank in a different state then I originally
set up my account. Thus, my entire direct deposit pay for a month of $6,000
went to an account set for a chase routing number in a different state.
Fortunately, I went to the bank soon after and they fixed it by putting the
money in my proper account.

If they had used a cryptocurrency, I would have lost an entire months pay.

~~~
dmurray
You have something like a 1 in 4 billion chance of entering a valid bitcoin
address if you made a typo, whether it's "one letter wrong" or some other
combination of changes (there's a 32 bit checksum). So actually this never
happens.

~~~
dnomad
This sort of thing happens all the time. Hackers routinely attack web sites
and change wallet addresses [1]. They setup fake Twitter accounts, fake web
sites, muck up exchanges with fake listings, and in some cases even hold fake
investor meetings. By some estimates hackers have stolen $400m from ICOs [2].
All of this nonsense is possible precisely because crypto transactions are
irreversible so the currency users have absolutely no recourse.

[1] [https://www.cnbc.com/2017/07/17/coindash-website-
hacked-7-mi...](https://www.cnbc.com/2017/07/17/coindash-website-
hacked-7-million-stolen-in-ico.html)

[2] [http://fortune.com/2018/01/22/ico-2018-coin-bitcoin-
hack/](http://fortune.com/2018/01/22/ico-2018-coin-bitcoin-hack/)

~~~
dmurray
Yes, cryptocurrency institutions get hacked and their customers lose money
(more often proportionately, it seems, than their dollar equivalents). I was
replying, however, to the ill-founded claim that people lose money by
mistyping a single wrong letter in a bitcoin address.

------
wslh
What is sad is that the competition is at the legal level, US has a regulation
complexity, and no fintech sandbox, that makes almost impossible to compete.

It is like Uber where you can explain the funding in terms of legal expenses
because technically everything else is relatively simple.

------
synaesthesisx
I for one am looking forward to the securitization/tokenization of student
loans

~~~
wmf
When are token default swaps coming?

~~~
loganfrederick
[https://dharma.io/](https://dharma.io/)

------
matte_black
Has the SEC classified crypto coins yet as securities or commodities?

~~~
cdiddy2
apart from saying that bitcoin isn't a security, no. Just yesterday this
infuriatingly vague video came out
[https://www.youtube.com/watch?v=8YtZJRUak8E](https://www.youtube.com/watch?v=8YtZJRUak8E)

But they refused to actually say if any specific coin was/wasn't a security
besides bitcoin.

