ICO Regulatory Issues

The Gini team has pondered the advantages and disadvantages of executing an "ICO" and various other currency distribution structures for several years as we have watched the cryptocurrency industry evolve. ICOs can be a blessing because they enable project teams to quickly raise capital for their projects, but ICOs are also an increasingly complex process as governments and politicians try to figure out how to regulate them.

The Gini Launch Event is Not an ICO. Before we continue, let's be clear: For all the reasons discussed in our SEC analysis, it's not accurate to say Gini is conducting an "ICO" because the Gini cryptocurrency is a currency, not an investment security. Gini will conduct a Gini Launch Event ("Gini Launch") sometime in early 2019. That's when the Gini cryptocurrency will be available to the general public.

Oppressive Regulatory Uncertainty. These days, the most challenging aspect of launching a securities-based ICO or the commerce-based Gini Launch is dealing with all the oppressively ambiguous regulatory issues. In general, we welcome increased regulatory scrutiny of the cryptocurrency industry (as we’ve published here and here) because it helps to eliminate the scams, which hurt the entire cryptocurrency industry. However, we are not afraid to confront abuses of political power when we see it. For example:

KYC Background Checks Violate the Spirit & Purpose of a Cryptocurrency. Many people (and here) refuse (for good reasons) to participate in ICOs that require KYC background checks. We have a deep appreciation for their frustration because we agree that KYC violates the fundamental spirit and purpose of having a private cryptocurrency in the first place. If you’ve read the Gini whitepaper and/or the Gini book, our position on privacy should be vividly clear. So, you can imagine how disgusting it is for us to be forced by short-sighted politicians to violate anybody’s privacy.

KYC Background Checks Create Serious Risks. There have been several fraudulent ICOs that pretend to be doing KYC compliance, but they’re really just using the ICO as an excuse to collect thousands of passports and ID documents, which they can then sell on the black market and/or use for other nefarious purposes. This is a legitimate concern for many people and we take their concerns very seriously. So, in cases where we are legally forced by governments to perform KYC, we will only use well-known KYC service providers that have a proven track record and strong security systems and protocols in place.

Good-Faith Balance Between Privacy & National Security. Many crypto/blockchain project teams blindly accept the tyranny of intrusive governments without thinking about the long-term philosophical, economic, political and existential consequences of living in a world without privacy. From a humanitarian perspective, this is intolerable. Thus, we are trying to achieve a good-faith balance between the legitimate privacy concerns of our Gini Community and the legitimate need for legitimate governments to prevent truly dangerous large-scale criminal activities. Gini's policy on KYC is intended to achieve this balance in the following ways.

We Require KYC on All Gini Launch Transactions that Exceed $10,000. This policy is based on the threshold used by banks for their Suspicious Activity Reports (SARs); so, we believe this is a reasonable balance. Generally speaking, this policy applies to all countries. However, as we retain more lawyers from different jurisdictions, we may relax this requirement for stakeholders that come from countries that don’t have any KYC laws. If you come from such a country, please send us a message and cite the relevant laws from a credible source. That will help us bring Gini to your country more efficiently.

“Accredited Investor” Laws. Some countries have regulations that forbid their citizens from participating in any cryptocurrency sale (ICO or commerce-based) unless they are “accredited” (i.e., wealthy people). Gini is not selling investment securities; so, they would be called "accredited customers" in our case. Regardless, we are legally forced to comply with those laws/regulations completely. If we don’t comply, we give politicians in those governments an excuse to create legal problems for us, which would become an unnecessary distraction from our broader humanitarian mission. Thus, all purchasers (regardless of purchase amount) that come from countries with "accredited investor" laws must provide KYC information so we can confirm they are “accredited customers”.^[1]

Dealing with Abusive Politicians. Although we will comply with all laws, if it appears politicians in any country are abusing their power to prevent their citizens from exercising their human right to engage in non-criminal private transactions, we will vigorously fight those politicians with all legal means at our disposal. This includes taking our case directly to the supreme court (or equivalent highest court) in that country. Treating citizens like criminals before they have even committed a crime is a gross human rights violation. We will work with our lawyers, NGO allies and civil rights leaders to publicly expose any politician or government that tries to do that to any Gini stakeholder.

Dear Politicians and the Agencies You Control: If your country does not have explicit laws/regulations that require your citizens to be “accredited customers” to participate in the Gini Launch, there is no legal or moral justification to force us to collect sensitive KYC information from any Gini stakeholder. So, unless you can prove we are deliberately breaking a specific law, please don’t harass us with frivolous threats and intimidation. We will work with our lawyers, NGO allies and civil rights leaders to publicly expose all threats and intimidation.

Temporary Restriction on Non-Accredited Customers. In countries that have "accredited investor" laws, the Gini Launch will initially only be available to accredited customers based on the "Reg D" exemption provided by the SEC and equivalent exemptions in other countries. This is technically not necessary because the Gini cryptocurrency is not a security, but the regulatory environment in the U.S. and some other countries is so oppressively ambiguous about the cryptocurrency industry right now that we don’t have a choice until we receive a formal response to our SEC analysis.

What Happens if the SEC Rejects Our Analysis? Then the fun begins. Seriously, if they reject our rational and good-faith analysis, then Gini will operate outside the United States, temporarily restrict access to the Gini Launch to only accredited customers, and litigate our case all the way to the U.S. Supreme Court, if necessary, until all humans are allowed to participate in the Gini ecosystem. That will be one of the most epic Supreme Court battles in human history. So, bring your popcorn and watch the fireworks because it's going to be a truly fascinating journey.

Dear U.S. Regulators: We respect your role in American society, we understand you are human, too, and we are aware of the difficult job that you have, especially with ever-shrinking regulatory budgets these days. So, we say this with the utmost respect: If our analysis is rejected for political reasons (e.g., because some partisan politician doesn’t like Gini’s mission) or some vague reason that appears to be rooted in politics; the preservation of gigantic, greedy, monopolistic banks; or some other reason that is not truly in the best long-term interests of the American people, the same principles that we discussed previously apply here, too. Specifically:

We will fight all the way to the U.S. Supreme Court (if necessary) to defend the right of all Americans to participate in the Gini ecosystem. There is absolutely no U.S. law that prohibits private American citizens from using a private cryptocurrency to engage in non-criminal private transactions; nor is there any law against grassroots community activities to promote substantive economic reforms to save the American people from the toxic scourges of broken monetary policies and bank capitalism, as described in the Gini whitepaper. Indeed, if such laws were ever passed, that would be the end of American democracy and freedom as we know it, which are already endangered species.

Thank you in advance for treating Gini’s regulatory concerns with fairness and respect. Since you are humans suffering from incompetent and sometimes corrupt American politicians and their unsustainable fiscal and monetary policies, too, we hope you also appreciate Gini’s authentic and important humanitarian purpose. (And it’s OK to secretly cheer for Gini when your bosses in Congress are not watching!)

[1] The purpose of “accredited investor” laws is not completely evil; so, we respect their intent to protect the general population from scams. However, the Gini cryptocurrency is not an investment security, as we have thoroughly explained in our SEC analysis. Additionally, like so many other forms of systemic bias, these laws often result in only the richest people gaining access to the most lucrative opportunities. Obviously, we don’t like this, but wherever there are explicit laws, we must abide by them to protect the Gini ecosystem from unnecessary legal distractions.