Mark Cuban, Photo by Gage Skidmore
Mark Cuban is back to being negative on cryptos. But then again, he isn’t. It’s complicated.
The billionaire investor and owner of the NBA’s Dallas Mavericks said recently that 99% of all crypto investors will lose everything. But wait. At the same time, he is still high on them and critical of the SEC for wanting to regulate cryptocurrencies and NFT’s.
The gist of Mark Cuban’s argument against SEC regulation is that cryptos, like Bit Coin, are tokens that can be traded and used to buy things. This, he explains, makes them completely different from stock and bonds in that the latter cannot be used as money to buy things. The holder of s stock must first sell that asset and then use the money tp purchase something else. But a crypto taken can be used directly to buy things.
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Unfortunately, this is not really the case. The common person cannot actually access their cryptos to use directly as money. They need to first sell them. The cryptos are virtual in that they do not really exist and so people must put their faith in unregulated businesses that claim to hold the currencies for their clients. But look at what happened recently to FTX.
Ad if you hold something like Bit Coin, which is worth thousands per coin, how do you spend it? They certainly can’t be used to acquire small items like tickets to an NBA game like Mark Cuban says.
And without government regulation, no one will ever be able to be sure that their cryptos have any real value or can even be used. For example, if the same business or person owns more than one crypto exchange, he can today buy and sell his own cryptos back and forth between the exchanges, thereby artificially raising their price and making it seem that they are in high demand.
The regulations imposed on stock exchanges and securities industries make sure that something like that cannot be done with stocks and bonds.
Even in his own Tweets, Mark Cuban acknowledged this problem saying, “There has never been a test of the multi-function utility of a token. When an asset is multi-function it’s impossible to determine the intent of the owner, buyer or seller.”
And so, he thinks the SEC should offer a registration process that is specific to crypto tokens and future multi-function digital assets.
“By doing a crypto-specific registration process the transparency for the enterprise could increase dramatically,” acknowledged Mark Cuban. “They could eliminate anonymity. Require disclosure on how wallets are secured and maintained. What the wallet addresses are. How and where the token will be traded? “
But his problem is that “Tokens can be used to pay for gas fees, NFTs, Mavs Tickets, books, carbon credits, insurance and much more. The SEC wants to make the original intent , to raise funds for a common enterprise the defining factor for any token. “
Mark Cuban called this “an overreach.”
“A crypto token is typically MULTIFUNCTION (his use of all caps). It can be used for all the things mentioned above and more.,” he added. “If a token is used to fundraise, the SEC wants to define the token as a security and have it go through a registration or exemption process like single function shares of stock. That doesn’t work.”
“The SEC needs to define a registration process that adapts to multi-function securities”
