Alex Lindgren

Highlighting Regulatory Issues with Forward Contracts on Crypto Assets by Mike Frisch & Alex Lindgren, contributions from Karl Lindgren link.medium.com/QOG9JcVzqNb

Prediction: innovation exemption is going to be very cool but still leave almost everyone unhappy

@austincampbell anti-clanker bigotry, that's what this is

Hester's meaning is plain and obvious: replicants cannot be allowed to trade securities.

If you go to any city in America, there is a chance that you will meet someone who has become a millionaire from investing early in Apple, Google, Tesla or Nvidia. If you go to any city in America, there is almost a zero % chance that you encounter anyone who has become a millionaire from investing early in SpaceX, Anthropic or OpenAI. There will be severe sociopolitical consequences from this when all of the dust has settled.

I appreciate the interest in--but not the hyperbole about--the contemplated innovation exemption for the onchain trading of tokenized NMS stock. Keep in mind: I've always expected that it'd be limited in scope & would facilitate trading only of digital representations of the same underlying equity security that an investor could purchase in the secondary market today, not synthetics.

Yesterday, some commentary landed on the tokenization of securities and freely trading in DeFi. By free, it means apparently without a whitelist or KYC. I find this quite interesting and a positive step from the SEC, though I also suspect some of the claims in the article are probably a bit... out of context, because it's going to be very hard to freely trade stocks in DeFi without issuer permissions and without KYC. I say that as a former Wall Street trader and practitioner in this space. Why? One: dividends. When we think about the prospect of securities trading onchain, we also have to port to the chain all of the actions that come along with the security and the rules around those. In the case of dividends, specifically, that requires payment (on a specific date and time) of dividends to the holders of those securities, which means you need to know where the security was located at the time and who was holding it, how much of it they owned, and where to pay them. So on the surface, that seems easy on a blockchain, right? You know the wallet of the owner, and the history of the chain will tell you exactly who owned it. In addition to an ex-div date, you probably need an exact time and block, but that's a solvable enough problem. Except, you don't know WHO the owner is. This creates two problems. The first is tax. Who is doing the withholding here? How do they do that? It's going to be hard to do this properly without knowing who the holders are... The second, though, is even more severe: OFAC. Without knowing who the holders are, especially given the known actions of sanctioned entities onchain (IRGC, North Korea, etc.), there's probably no way to pay a dividend without knowing you have committed an OFAC violation, and unlike the arguments around diffusion and immateriality for paying a quarter of a tenth of a fifth of a cent on Solana, here, uh... yeah, no, that could be super material. So what will happen? Do you just not pay the onchain people? Do you put them in a container that will require them to come KYC to get the dividend? How do you do that? It's not obvious to me how this would work. This also generalizes to any coupon payments, prepayments, etc. for fixed income. Second: Control rights and voting. If you study some of the nonsense around insider pools, around corporate "mergers" (where one side controls a voting share of the other side), and more, there's going to be a lot of issues with voting where you don't know the holder of the stock. I might go one step further and say that under some of the aggressive interpretations of law, it creates fiduciary problems because a board will have no way to know if a shareholder vote is legitimate or not. But suffice to say, I think the complication here is exceptionally real. So where does this lead me? Could you get some sort of price index onchain, through a perpetual or something? Almost certainly, though now we are into derivative and security based swap questions instead. Could you get literal voting rights and dividends onchain? I think it's very possible, yes. Can you do the latter on in DeFi and without having to know who the holders of wallets are? There I have some very big questions. I think you have to be quite careful here. Could an ADR type situation work, where you strip voting rights and dividends? Yes, in theory. Would that fragment markets and maybe trade at a discount to stocks? Also yes. Is that good? YMMV. Can you do any of this without issuer permission? Well, in theory, probably, but how is that going to work when either the issuer or a bank refuses to pay a dividend citing OFAC concerns and then makes (at their own expense) holders come identify themselves and provide tax info to be able to do this? How will it work when they simply refuse votes from tokenized shares for fiduciary soundness reasons as they can't know things like the shares aren't held by nation-state enemies or insiders at competitors? It will be a mess. In short: this is a super complicated issue and I don't envy the SEC dealing with trying to maximize distribution while staying within the bounds, and I think there are likely to be compromises that we all have to live with.

Reg Crypto, as currently drafted, will NOT be viable for many crypto projects because it requires a domestic token issuer. - Sales of tokens by a non-tax-exempt U.S. C corp are taxable to the C corp. Unless the corp has sufficient offsetting net operating losses, selling tokens will be less tax-efficient for the C corp than issuing equity or debt, which aren’t taxable. - Airdrops from within the United States give rise to withholding and info reporting concerns. There’s an argument that claimable (as opposed to automated) airdrops aren’t income to the recipients, in which case withholding and reporting go away, but the law is unclear and many projects do automated airdrops for technical reasons, such as ongoing token incentives.

@NelsonMRosario But I'm under a geas to know everything lest the demons in the basement of my mind be released isn't everyone...?

Furthermore, it is particularly dangerous in this day and age when you have a previously unimagined ability to know things that you care about and are worthwhile to you

@bjs_alejo2 Dawnbreaker is that you?

hombres puntúen este palo

@nkrosse Unironically yes

America demands art deco data centers

Pokémon battling with a client's Claude has to be the funniest aspect of 21st century legal practice

Pleased to announce that we've been ranked as a top Fintech practice in California for the second year in a row by @ChambersGuides! I'm also extremely grateful to the amazing clients who have given us this opportunity and trusted us to advise them on frontier products and critical transactions alike.

@lex_node @senamakel @KelpDAO @LayerZero_Core

@BowTiedTamarin @TetraChad Best tradesmen I know have made a lot of money and put lots of that money into ensuring their children get a professional career. They also put a lot of money into the pockets of their orthopedists as they age. v0v

a smart blue collar guy will tell you learning some kind of trade is a good skill to have, but probably not how you want to make a living forever if you have the brain to do something else. both due to the people and the toll it takes on your body. I often like these guys. They're interesting and capable.

The stereotype is that white collar ppl look down on blue collar. The reality is opposite. Blue collar culture is arrogant AF. Those dudes mock everyone who doesnt live like they do. And if theyre blue collar AND live in a rural area it's 1000x worse, literally insufferable

@Empty_America As it should be

When you, as a middle class, hire a self-employed plumber, you are hiring someone at your equal or higher economic level. It's more like hiring a lawyer or doctor, rather than a cheap "working class" servant as in times past. The bill hurts.

I'm deeply sympathetic to this perspective, but I have to ask - how is it surprising that after a decade of failing to prevent North Korean hacks, government is suspicious of the industry's ability to meaningfully combat things like terrorist finance penetration of US financial markets via DeFi? I'd posit that "accept north koreans in US finance" or "give up on DeFi" are not the only options here, but hey, what do I know?

@keysmashbandit pmc.ncbi.nlm.nih.gov/articles/PMC10…

I'm going to out myself as an unbelievable nerd but here goes: back when I was a young man with time to spend on such things, I played a little game called Eve Online. My 'guild' in that MMO had - and this emphatically not an exaggeration - more robust and paranoid 'hiring', screening, and security practices than many teams in the crypto space. I am begging this industry to grow up *fast* or we are going to lose the potential benefits of all this to the collective continuing inability to not continuously donate money - often from retail depositors - to the NK nuclear program.

Welp