The Ledger: Tesla Tokenization, Bitcoin ETFs vs. the SEC, Indiegogo

There were many reasons Musk cited for why Tesla was “better off as a public company,” but one of them particularly struck me: “There is also no proven path for most retail investors to own shares if we were private,” Musk wrote in his official statement.

No proven path. Of course, he’s right. U.S. financial regulators restrict ownership of shares in startups and other private companies to so-called “accredited investors”—those considered wealthy enough to be able to afford the additional risks that come with owning stock that doesn’t trade on mainstream markets, making it illiquid.

But there is one risky investment that retail investors can own no matter how rich (or not) they are: cryptocurrency, obviously. The U.S. Securities and Exchange Commission doesn’t prohibit individuals from buying Bitcoin and other digital assets directly—largely because it can’t, due to the decentralized structure of the blockchains on which those cryptocurrencies run. On the other hand, the SEC has prevented cryptocurrency from becoming even more widely available—such as it did this week by rejecting the rest of the pending applications for Bitcoin exchange-trade funds, or ETFs.

Cryptocurrency, however, is far from “proven” when it comes to offering a responsible way for people to invest and diversify. Just check out this week’s “rekt” section for various tales of individuals who lost their savings in cryptocurrency.

Still, I can’t help thinking that crypto could one day help provide the path that Musk is looking for. It’s an idea that came up a couple of weeks ago on our show Balancing the Ledger, when Andra Capital’s Haydar Haba suggested creating a “Tesla Coin” to solve Musk’s problems.

There’s still a major obstacle in the way, though: Haba and other entrepreneurs offering “security tokens” currently also restrict them to accredited investors in order to stay on the right side of the SEC.

Slava Rubin, co-founder and CEO of Indiegogo, described on this week’s show how his company only sells its security tokens, usually backed by real estate, to those who prove their accredited status through a verification process. But he also alluded to the way tokenization could open up “a whole other asset class to more people” the same way Bitcoin does for investors around the world.

Unlike Bitcoin, though, such security tokens are backed by tangible assets with established real-world value, making them potentially safer for retail investors, Rubin added. “With one of these security token offerings, you have a clear building that has customers, that has employees, that has been around for years,” he said.

Maybe someday the SEC will allow everyone to own tokenized stock of companies—whether they’re public or private.

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THE LEDGER'S LATEST

China's Alibaba, Tencent Bar Cryptocurrency Transactions on WeChat Pay, AliPay by Lucinda Shen

The World Bank Just Issued a Bond That Relies On Blockchain Technology From Start to Finish by Lucas Laursen

Ritzy Aspen Hotel Sells Real Estate on Blockchain with Indiegogo's Help by Robert Hackett

Decentralized Apps Like CryptoKitties Are Stalling by Jeff John Roberts

Police Nab Alleged Boss Behind Bitcoin Pyramid Scheme Bitconnect by Robert Hackett

DECENTRALIZED NEWS

To the moon... Mt. Gox victims now can (and should!) file claims—whether or not filed in the past. A U.S. Congresswoman bought the crypto boom. Bitcoin buy signals from CNBC. Record bearishness may actually be helping Bitcoin. Reddit co-founder is still betting on Bitcoin.

....Rekt: SEC rejects Bitcoin ETFs. Bitcoin Cash is down 90% in its second year as usage plummets. Bitcoin boom investors feel the pain. People are Googling "rekt" more than "hodl."

BALANCING THE LEDGER

On this week's Balancing The Ledger, Slava Rubin, co-founder and CEO of crowdfunding site Indiegogo, stopped by to talk about the future of tokenized real estate, the differences between initial coin offerings and "security token offerings," and whether the startup itself might one day pursue its own ICO.

BUBBLE-O-METER

With a trend in crypto protocols running community grant programs, researcher Nadia Eghbal published an interesting analysis of the funding opportunities for developers working on open-source projects. Her breakdown of the typical reward size is a helpful guide for those seeking funding.

Median size of successful proposals:

• Monero: XMR106 (or $6,786, based on currency rates at the time of each proposal)
• Dash: DASH114 (or $22,088, based on currency rates at the time of each proposal)
• Zcash: $15,000 (see calculation methodology here)

MEMES AND MUMBLES

I dare you. Samuel L. Jackson's famous interrogation scene in Pulp Fiction has inspired a myriad of memes, and there is also one for blockchain fans—er, perhaps for friends of blockchain fans who are just a little sick of hearing about the technology and all the ways it's going to supposedly revolutionize the world.

The sticker, which you can buy for $4.12, seems to have captured the current mood—or at least that of a certain social media community.

FOMO NO MO'

Don't miss out: The cover story this week in market magazine Barron's, is on blockchain, and declares "the blockchain revolution is here...[and] also far, far down the road." One of the few examples cited in which blockchain is currently (and successfully) at work: French insurance company AXA and its product Fizzy, which offers travel policies to insure delayed airline passengers. One source in the article asserts "blockchain is not a technological solution to a technological problem" but rather "a technological solution to a political problem." The AXA case illustrates why that's valuable:

"Blockchain is useful because it allows me to say to the customer that you don’t have to trust the insurer on the data we are using,” Laurent Benichou, Fizzy’s founder, tells Barron’s. “Your policy is on the blockchain. AXA publicly commits to indemnify you if you are eligible. Because a smart contract is triggering the indemnity, the customer can know that we are honest with the data that we use. Potentially, for a paranoid customer who assumes we cheat, we say it’s not AXA anymore that’s a party to the transaction that will decide whether you get indemnified."

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