How Far Behind is the United States from a Regulatory Perspective and What Can it Do to Catch-Up to or Surpass Smaller Nations?
July 15, 2019
Bill Taylor, Chief Investment Officer, Fintek Capital LLC, discusses what the United States could do to keep (or even bring) digital asset funds onshore. Bill focuses on some of the strengths of the US and obstacles facing smaller jurisdictions. In this segment, Bill also discusses the significance of the accredited investor rule, pending federal legislation to broaden the definition of accredited investors and tokenizing collectibles.
DA: That's interesting. What exemption or what would you do under the SEC? Would you use a RegA+? What would be the most appropriate channel?
BT: I don't know why you'd even need that. We talk about accredited investors in Gibraltar. It's called an experienced investor fund. It’s the same thing as an accredited investor here, but they have to have that. But as explained to me by my legal team over there, an accredited investor is not necessarily an experienced investor. You might have $20 million, but you've never been in the market or been in a hedge fund or an alternative investment. An experienced investor may have traded a lot, but they may not meet the criteria for an accredited investor here. Their process over there is to be more market friendly to market to people here. Our process here is more regulatory to protect consumers rather than let them have an opening here and there.
For example, let's say that you like wine. Do you meet the definition of an accredited investor? Maybe yes, maybe no. You have a collection. You might have $100,000 in wine. You can tokenize that digital asset, which we'll define as wine as the digital asset. We can tokenize that and put it out there, but you can't buy it. You can buy wine, but you can't buy collectible wine because you're not an accredited investor. Why not? Why can't you have the same things? I can buy gold, I can go Google and buy a gram of gold and they'll send it to me. I can put it under my pillow. But if digitized, we don't know what it is here. So it's the same thing. Why do you have to have accredited investors? Why do you have to go through an offering per se with that? Why can’t you just do a normal token offering for any investors and they're buying a token that's backed by a physical asset, whether it be wine, real estate, metals, whatever the case may be. And there's no reason you shouldn't. DA: I think that that is the future. And actually, interestingly enough, there is legislation that's sitting in the Senate, as we speak, to broaden the definition of the accredited investor—to make it more knowledge-based, experience-based, as you had just stated as opposed to financial-based. That will be interesting to see how it unfolds.
BT: It should, and that's a good step in the right direction. But how long will that take to get through committee? That’s one of the problems. If you go to Gibraltar, Switzerland, anywhere else, they don't have that cumbersome committee work. They can make decisions and enact legislation to accomplish the same things in a fraction of the time that we would wind up doing here.