people in desperate situations, and
they think, “This is the thing that
can get me out of it.” You’re taking
advantage of people’s desperation.
It’s also important for people who
want to raise money this way to recognize that there is this large group
of people you will be associated with
who are tainting the whole ecosystem. If people think this is all just a
bunch of scams, it’s bad for everyone
who works on cryptocurrency.
GL Are there any cases where ICOs
could be a great solution to
something that wasn’t possible
RA There is an argument that issuing
shares or bonds for smaller companies should be much easier. Historically there were regional stock
exchanges all around the country,
and it might be nice to get back
to that concept. Instead of putting all your money in an S&P 500
tracker, you could put some of it in
a fund of local businesses. If tokens
are equity and it’s helping revitalize local businesses, that could be a
But that’s not just a technological problem—it’s about how to
reform accredited-investor regulation. Really, it’s an IPO. One day
tokens could represent shares, and
shares could be sold more easily, and
this technology hopefully plays a
part in that—but that’s a very different thing from ICOs.
GL What would have to happen for ICOs
to not just benefit a handful of rich
RA If this way of issuing equity is
restricted to very high-growth tech
companies, then it’s just a differ-
ent way of doing a similar thing. To
be more broad-based it needs to be
more accessible to the local barbers,
the local garage, the local baker or
butcher or whatever. These inde-
pendent small businesses need to
be able to tap in, and their custom-
ers, people in the area, should be
able to buy shares. You accept that
your local pizza shop is probably
not going to become Papa John’s,
but it’s still a good business and you
can invest in it.
The problem is that right now
everyone is looking for the grand
slam, the next Google. If you can get
more businesses involved that you
invest in because you want to support
your local business, and you want
steady growth but you’re not expecting 10x, 100x—that’s what it will take
for this technology to be much more
useful to a wider population.
GL In theory, couldn’t a local barber
who was tech-savvy enough already
hold an ICO?
RA I don’t think he could. It comes back
to the “What is the coin?” problem;
this is why the phrase “initial coin
offering” is a bad one. If the barber
had tokenized shares in his business
and was selling those shares; and if
the regulations around who can offer
shares to the public and what type of
accreditation you need to buy them
had been reformed, so that he could
do this legally and at relatively low
cost; and if his purchasers bought
that in the understanding that they
were buying a share in his business
and it wasn’t going to grow 100x—
that’s fine. But if it’s just, like, “Here’s
my coin and I’m going to get some
influencers to go and pump it,” that’s
not a good outcome.
We’re still talking about this con-
cept of ICOs, and that needs to be got
away from. The word “coin” is prob-
lematic because it implies money.
The concept of an ICO is almost
inherently flawed, and probably the
phrase needs to change, because it’s
trying to elide two different things.
GL What would you rather call it?
RA When I think about how to apply
this technology in the future to
make a better system, I think about
shares. The term IPO is perfectly
fine for me. But IPOs are only for
very big companies right now. The
question is how to get the barrier to
an IPO down much further.
The concept of selling shares in
my company to the public is fine.
The concept of using a blockchain
and tokens instead of whatever collection of databases they use now
to record shareholdings—yes, you
can do that if you want to. Will
that be helpful in terms of streamlining the back end and making it
more flexible? Yes, that’s a possibility. But then you need to think of
how the regulations can change to
accommodate that. This is almost
like going back to the past, of local
exchanges and the buttonwood
tree [where the New York Stock
Exchange was formed]. That’s the
sort of world I think we should be
aiming for. The whole ICO craze
at best is a catalyst; at worst it’s a
really deliberately misleading concept and phrase.
GL If people are looking at ICOs, how
can they tell which ones are run by
people trying to do the right thing?
RA If they’re using SAFT, that’s probably a good sign. It’s a way of trying to formalize the law around
token sales. But if they are using
that, they’re only selling to accredited investors. So if you’re a member
of the public and not an accredited
investor, it’s all very risky.