#198 Nick Morgan: The DAO, the SEC and the ICO Boom

Nick Morgan, a former attorney at the SEC, joined us to discuss their recent report on the DAO and what it means for the ICO boom.

Topics discussed in this episode:

  • The history and mandate of the SEC
  • Nick’s years as a trial attorney at the SEC
  • How the Howey Test is used to determine if something is a security
  • The application of the Howey Test to the DAO case
  • The weaknesses in their argument that token holders relied on the effort of others
  • Why the SEC did not prosecute the Slock.it founders
  • Why the SEC will likely focus on token sales involving fraud
  • How the SEC’s limited resources will make it hard for it to impact the ICO boom
  • The implications of the SEC report for cryptocurrency exchanges

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Alleviating corruption and poverty with technology

It takes 16 hours to drive from Lagos to Abuja, but one hour to fly. According to Google Maps, the trip should take under 12 hours. However, police will stop you every 30 minutes or so to ask for bribes. If you don’t pay up, you risk jail or your tires being slashed. My younger brother calls it “oil money” — ancillary payments such as these grease the wheels of Nigerian society.

The lack of accountability and corruption are entrenched in Nigerian society. Nigeria’s growing population of 185 million has encountered rising unemployment and violence. Youth under the age of 25 — more than 60% of the population — have been hit hardest. These are my cousins — talented and capable, with much to contribute. Society is leaving them behind.

How to buy bitcoin in Hong Kong

By Michelle Tam, Marketing Intern (Summer 2017)

Bitcoin is becoming increasingly popular as an alternative investment in Hong Kong, due to its low barriers to entry and phenomenal (albeit volatile) increase in value over the last few years and months.

Average USD market price across major bitcoin exchanges.

Even the local Hong Kong media report regularly on bitcoin’s price, the updates to its software and the other technologies that it has inspired.

Globally, bitcoin and other crypto-assets are being formally recognized by governments and new regulations have been released in major economies such as Japan and Australia to govern the activities of bitcoin exchanges. This is encouraging more mainstream interest in bitcoin, as prospective investors see the actions by these governments as signs of bitcoin’s legitimization in society.

Hong Kong still has no formal regulatory regime for the activities of bitcoin exchanges and the HKMA has designated the technology as a virtual commodity, rather than a payments network or digital currency. This creates both opportunities and a void of uncertainty for businesses wishing to offer bitcoin related services in the SAR and for their prospective clients, who may be weary of the lack of regulation.

So, given the regulatory uncertainty, why should Hong Kong residents engage with bitcoin, either as a digital currency or as an investment?

Bitcoin — the ideal payment app for Hong Kong’s globalized, jet-setting and well-connected population:

Image source: bitcoins.com

Faster transfers: thanks to a new feature of bitcoin, called Payment Channels, you can now conduct instant transactions, unlike with traditional banking services. This makes payments between friends, family, suppliers and customers much more efficient, and perfectly suits Hong Kong’s status as a global commercial hub.

Cheaper transfers: bitcoin is a decentralized peer to peer payments network, with no intermediaries charging additional fees, therefore the cost of transacting through Payment Channels are minimal, especially for cross-border transactions. As a gateway to China and the rest of Asia, low-cost, cross-border transfers are essential for boosting the competitiveness of Hong Kong businesses in the internet age.

Secure transfers: records of all bitcoin transactions are validated and maintained by a distributed network of “miners” who contribute their computing power to ensure that no one can conduct false transactions. The security of your bitcoin funds, depends on how you manage your private key rather than relying on third party custodial services. This ensures the reliability of payments, helping to boost Hong Kong’s status as a safe jurisdiction for financial services.

Global transfers: Hong Kongers love to travel — 70 percent of Hong Kong’s vacationing population will spend on average 14 days overseas per year. As bitcoin can be used anywhere in the world, it makes it the ideal payment method for Hong Kong’s globetrotters. There are now several debit cards enabling you to spend bitcoin wherever Visa or MasterCard is accepted, such as TenX and Monaco so that you don’t have to worry about credit card conversion fees when you travel. In 2015, a programmer called Felix Weis traveled around the world for 18 months spending only Bitcoin. This shows how far Bitcoin travel has come and the degree to which it is accepted internationally.

Bitcoin — a new alternative asset for Hong Kong’s tech savvy investors

Low barriers to entry: unlike with most traditional investments such as property or major stocks, there is no minimum amount required to invest in bitcoin. You can buy as little as HKD 1 or as much as HKD 1 billion worth of bitcoin. Although today the bitcoin price is worth more than several thousand USD, one bitcoin is divisible to 0.00000001, so there will always be an affordable entry point. The same cannot be said about housing in Hong Kong!

Easily liquidated: when you want to sell an investment such as a stock, gold, or an apartment, the process can be time consuming and laborious. You’d typically need to go through a broker, pawn shop or property agent. For bitcoin, you can easily sell your stake on a reputable exchange, such as Gatecoin, at any time 24/7.

Easily stored: bitcoin can be stored on several web, mobile and desktop wallet apps or more securely in hardware wallets which are not connected to the internet. This means that you can easily store and transport your investment anywhere. The same cannot be said for bars of gold or apartments on the 50th floor!

Future potential: bitcoin is still a very early stage technology (the software was released in 2009), and yet has already gained a large community of users. As bitcoin’s technology improves, making it more competitive as a payments network, secure store of value and computing platform, more businesses and individuals are likely to engage with it. Government regulation of bitcoin exchanges will add to the technology’s long-term legitimacy and will attract larger liquidity from institutional investors which is likely to add to its overall value.

IMPORTANT: Of course, like with most assets, investing in bitcoin comes with a high degree of risk. Due to bitcoin’s historical volatility, it is wise not to invest more than you are comfortable losing.

So, now that you are excited to engage with bitcoin as a payment protocol or investment, how can you get your hands on bitcoin in Hong Kong?

Step 1: Go to Gatecoin.com— Gatecoin is a bitcoin exchange headquartered in Hong Kong that enables you to buy and sell bitcoin (BTC) with HKD and USD. Gatecoin is licensed as a Money Service Operator (MSO), which governs the exchange’s foreign exchange activities, and is regulated by the Hong Kong Customs and Excise Department. Therefore the exchange enforces stringent know-your-customer (KYC) and anti-money-laundering (AML) policies. This is designed to demonstrate the firm’s adherence to global AML best practices in the absence of any formal guidelines for bitcoin exchanges in Hong Kong.

Step 2: Create an account on Gatecoin. Start off by filling in your personal and contact details:

Step 3: You will receive an email verification from Gatecoin. Click the link and continue the registration process:

Step 4: You will be required to upload a scan or photo of a government issued-ID and proof of residence:

Once submitted, Gatecoin’s compliance team will review and verify your account within two business days.

Step 5: Once verified, you can fund your account through HKD or USD bank transfers. After the funds arrive on Gatecoin’s bank account the amount transferred will be credited to your Gatecoin account within two business days.

Step 6: You can now easily buy/sell bitcoin using the exchange’s trading platform at the prices and quantities displayed in the exchange’s order book!

For purchasing larger amounts of bitcoin, the Gatecoin team also offers off-exchange transactions through their OTC trading desk.

Click here to find out more about buying bitcoin through Gatecoin in Hong Kong.

To learn more about bitcoin, visit Gatecoin’s bitcoin page.

I hope you found this article useful!

Thanks for reading,

Michelle Tam


How to buy bitcoin in Hong Kong was originally published in Gatecoin Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Making token sales smart

One of the core benefits of blockchains is that they enable you to transfer assets to anyone around the globe. These assets can be native “protocol tokens,” like bitcoin or ether. They can be “app tokens,” which are managed by small computer scripts running on the Ethereum blockchain known as smart contracts. Or tokens can represent real world assets, like a barrel of oil, diamonds, stocks, bonds, investment securities, a piece of machinery, or even a contract itself (e.g., a lease, deed, or title to property).

Ethereum makes it relatively easy to create tokens. With less than a hundred lines of code, a software developer can create an ERC20 token, deploying a smart contract program on Ethereum that keeps track of who owns a given token at a particular point in time. Over the past several years, ERC20 tokens have taken the world by storm, with over $1.8 billion in tokens sold to date.