 For the remainder of this evening, so what we're going to do is, first of all, we have the keynote speech by David Jermic, and I will introduce him in a second. After that, we have a panel discussion, and the crowd-admessings symposium always thought we would like to bring industry regulators and economics together, and this is the first time we actually achieved to get the most important regulators, namely the central bank and the securities regulator, for the panel discussion today. And thereafter, we will have a Q&A, so you can ask about the keynote speech and about the panel discussion. You can also use the Twitter hashtag, which is written over there, and post questions over there, so I will forward it to the moderator. So for this year's conference, I'm usually not a conference organizer. I don't really thought or didn't know what the point about it is. But then I realized, actually, it's quite a nice thing, because what you can do is, if you're interested in the research topic, you can always invite the most interesting people on the topic, and then you ask them first, and if you're lucky like me, the most or the best speaker you could imagine or think of actually agrees, and this happened for the last years, it happened this year, so I'm very glad that David Jermic agreed to come as a keynote speaker this year. And I must say he's really the ideal keynote speaker for the crowd-admessings symposium, and why is that? Because I think nowhere in the world, or it's very difficult around the world to find a scholar who brings together expertise in law and economics. Well, there are some law and economics scholars, obviously, but on the other hand, you also need someone who is interested in topics of financial technology. I think there are not so many scholars around the world who are interested in law and economics and have a particular interest in financial technology. So, David actually accomplished this quite well, because he did a bachelor's degree in economics at Harvard University. He did a master's degree in business administration at Harvard University. He did a Dr. Juris, and you'll guess it, it's at Harvard University. Then he did a master's degree again in business economics, yet again in Harvard University. Then he did a doctorate in philosophy and business economics, and you're right, it was at Harvard University. Actually, yesterday there was a speech by Benjamin Edelman, and the commentator said, apparently he really likes this place, Harvard, and I thought, what a lame line I would say, but when I was reading David's CV, I really thought, this is really true for you. And so you apparently really like this place. So currently, David is the Albert Fingerhood Professor of Finance and Business Transformation at NYU CERN Business School. And he also serves as the Chairman of the Finance Department. He's the Director of the NYU Pollock Center for Law and Economics. And you might guess it, he's also the Editor of many journals and has been Editor of many journals. And I have to disappoint you, now you know that he's the Editor. You can't buy him a drink because the financial support of this conference is kindly supported by the Max Planck Institute, but there might be another opportunity to do that, I guess. So he's the Editor, among others, or Associate Editor of JFQA of Financial Markets and Portfolio Management of the Journal of Financial Economics, multinational finance journal, digital finance, Journal of Law Finance and Accounting, and so on. He's also one of the many, or one of the very few people who actually teach courses in FinTech. So he taught a course or teaches regularly courses in Bitcoin and cryptocurrencies, he's published a lot of papers. Among others is Bitcoin, A Real Currency, which was already published in 2015. Then he has published a lead article in 2017 of the Review of Finance on Corporate Governance and the Blockchain, which also received a prize as the best non-investments paper. He has currently a new working paper on initial coin offerings. And today he will talk about, are ICOs a real innovation or just securities in disguise? And I'm very much looking forward to your presentation. So the floor is yours. Thank you very much for attending. Thank you. Thank you very much. Thanks for coming out today to hear my talk. And as Lars mentioned, I have a new paper on this topic. I'm going to say almost nothing about this because, in fact, it resembles many of your papers, as I've mentioned, in making comments earlier today. There are many new papers on ICOs. And the talk I'm going to give is actually similar to one I was scheduled to give last November in Shanghai. I was keynoting a conference very similar to this. And the topic was about ICOs. And they contacted me about 10 days before the conference and said that I would have to change my topic because it was politically too dangerous to discuss this subject. So I was a little taken aback because they had not objected. And in the interim and between planning the conference, I think many of you know the Chinese banned the initial coin offering. And I said, even if you banned it, why can't we talk about why it's banned? And so forth. But they instead wanted to just pretend it didn't even exist. And so I was politically suppressed and have now vowed never to speak again in China until there's academic freedom and so forth. But I'm happy to come talk about this in other venues. And the issue has really gotten, I would say, quite hot in the last year from a regulatory point of view. And I really want to talk about how the US has handled this, how other countries have handled it. And what I think the future holds, the person at the top of the slide who I'm going to use really is the straw man for this talk. I think many of you will recognize this is the head securities regulator in the United States. This is Jay Clayton, who is the chairman of the SEC. And he made these comments back in March in a hearing in the US Senate where he took a very extreme position saying that every ICO he's seen is a security, meaning that they should be regulated by him. And I think you can understand this in one of several ways. Maybe it is true that all ICOs are securities, although I'm going to argue pretty strongly against that point. I think it's also possible that Jay Clayton just hasn't seen very many of them, that he hasn't taken the time to inform himself. And I think that may be the most likely, in fact, it's a knee-jerk reaction that the regulator is afraid of this and is trying to close it down before it leads to more embarrassment for the agency, which they've had a considerable amount in the last 10 years. I think really you're looking at something quite new. And I have to say that I have, in the course of about 14 months, traveled a long way and reexamined many of my own beliefs on this. So the first time I heard about ICOs was last April and March when I was teaching the blockchain course I have at NYU. And this event popped up on the calendar called the Token Summit. So you can see this gentleman is wearing a Token Summit t-shirt. This is New York 2017. And this was a meeting convened by a bunch of venture capitalists and they rented a room at NYU. In fact, the room that they rented was my classroom, the same auditorium where I teach this topic. And they kind of snuck in under the radar without permission and got the veneer. It's like if someone had rented a room here in the Max Planck Institute, said we're having a conference and made it seem like the institute was hosting it, but it really wasn't. And these Token Summit people approached me and my co-author Sabrina and basically any faculty member they could find who might give some legitimacy to this and talk about it. And we all said no way. We didn't want to touch these tokens because they looked like pure fraud. And this is a video where this gentleman who went to the Token Summit, he goes on for about an hour. I'd like to play just the first two minutes to give you a flavor for what it was like and then I'll say a little bit more about it. Hey, man. I'm Osaname Vangelina. Welcome to Hacking the Sensitive. The show where I teach you how to make six figures in your 20s by any means necessary. And this week I had the pleasure of attending Token Summit in New York City 2017, the world's first conference purely dedicated to initial coin offerings. So that's my classroom. What are ICOs and how are they disrupting and hacking venture capital? And today's show I'll cover this and how ICOs are creating millionaires, millionaires in two or three years. I had the pleasure at this conference of meeting tons and tons of crypto millionaires. Guys who make their millions on Ethereum. I met like five guys in one meter who made millions off of Ethereum. One guy made millions off of made safe. So ICOs, ICOs, baby, are the new Gold Rush. Today's show I'll break down how you guys can leverage ICOs to make your first million. Let's get into it. Okay, so this does go on for an hour and it's highly entertaining. But you can see how this would raise alarm bells with the securities regulator. Because people who have no idea what they're investing in are throwing money at this new product. And I was relieved that I had not become involved in this. Now, this is a rare case where I'm going to admit that I misjudged the situation. And I have a lot of regret that I didn't speak at the Token Summit. Because this was the coming of age moment. You saw the data earlier today where the whole market took off from May of 2017. This was really the point of reference for many people. I wish I had that Token Summit t-shirt that I probably could have gotten for free. And we just had Token Summit 2 in New York. Which is now a pretty important event with a new type of property that I think is not a security. In fact, it's not anything that we've seen before. And what the regulator could or should do about it remains very much an open question. So there are many studies circulating that have this flavor that ICOs are essentially a breeding ground for fraud. So this is one where they look at the universe of ICOs defined very broadly. And conclude that 81% are scams. And another 6% have failed already. And another 5% got off the ground but have gone dead. And only 8% ever see the light of day. And of that 8%, only 3% are successful and so forth. So the message here is that this is something that is very dangerous to the investment public. And almost everyone involved is promoting something that we should stay away from. Now, if we have time, I'll come back and talk more about this data later. Because I think like most data it's somewhat misleading. But I would also ask if we looked at any slice of entrepreneurial ventures like new restaurants in New York or whatever. And we took an extremely broad view of everybody who ever thought of starting a restaurant, how many of them ever squeak through. And is this glass in other words half full instead of half empty? So what's happened, I think you all know, is that the market has moved in this direction extremely vigorously and strongly. So if we look at the largest ICOs, and this has really only been going on for a little over a year. But as of the end of June, you're seeing some very, very large deals come to the market. And now some of them into the billions. The one at the top of the pyramid is this guy who I think he's based in Bermuda and he raised $4 billion for a blockchain. Nobody knows what this thing actually does. But if you're not paying attention to this, you're missing something that's pretty important. Because we could look at the biggest IPOs of the last 12 months. Or the biggest anything in finance really. And this is really where the action is. But at the same time, people are throwing money at things that are clearly not securities. And if the SEC is worried about fraud and so forth, maybe we all should be. But there's lots of fraudulent markets. Like the market for used cars has a lot of fraud in it, for instance. But the SEC doesn't jump in and try to regulate used cars. And the market for real estate and all kinds of other industries is full of misleading statements and consumer protection issues and so forth. But do these ICOs really exist in the world of other investment securities? Such that governments should be using existing laws and relying on current regulatory agencies to step in and do something about that. The more you look at them, the more I think you need to be skeptical of this just because of the way they're designed and put together. So this is the head of enforcement at the SEC. It's a guy named Steve Pekin. He's essentially the number two person there. He's also a law school classmate of mine. And he came to NYU with his boss, Jay Clayton. And they gave this presentation last September. And they absolutely went on the attack. Pekin said that ICOs were roaches. Is there a German word? Is it the same? I know you, this is a very clean country and you don't have roaches here. But Pekin said roaches kind of crawl out of the woodwork and try to scam money off of investors and so forth. And they've really thrown down the gauntlet and said that this is something that we're simply not going to tolerate or at least are going to scrutinize extremely carefully. Now, the issuers of the ICOs don't want to be regulated by the SEC or by the regulators in any other country in particular. In fact, this whole thing was designed, I think rather cleverly, to be beyond the reach of existing laws. And I think the issues are rather obvious. But in case this is confusing to anybody, regulation can be costly in that you have to pay filing fees and produce all kinds of documents. And it introduces delays because there are review periods and so forth where the regulator can keep you from coming to market where you might have wished to. I think a second issue and some of the papers earlier today got at exactly this point. If you are regulated as a security, you really have to publish a disclosure statement. We call it a prospectus in the US markets, where there's a whole laundry list of information that may be irrelevant to the market or may even be something that you wish to keep private in your own interest. So this is the old issue of mandatory versus voluntary disclosure. I think it's a very interesting one. But if you are in the world of securities, you basically have to live with the mandatory disclosure. And this is something that may be harmful to the bottom line of your business. But I think at least in the US it's the third issue that is the matter of greatest concern. We have pretty strong investor protection laws that allow people to sue as essentially disgruntled investors on a class action basis. So there can be very large liability both for people who issue securities and for the third parties such as the accounting firms, the banks and so forth who might have been involved in the issues. And this has been very controversial in the world of IPOs and other forms of capital raising. And people issuing ICOs don't want to touch this liability at all. Now, I've made an effort to learn about the history of this and I've supervised a couple of student research papers. And I think that ICOs are really quite different from securities and I'll explain why. But they are also things that we can recognize as pretty clear descendants of different types of products and assets that have been in the market for quite some time. In fact, the antecedents of these have been right around us for many, many years. One of the most obvious things is the world of online video gaming. So I am sure nobody in the room actually does this in your free time, but there's this whole parallel universe of people who go online for hours, play these massive multiplayer online fantasy games. And many of these games have internal currencies where if you kill the dragon, you can get a coin and then you can use it to buy roses for the maiden or to send messages, whatever, I don't do this myself. But these coins are viewed as valuable by people who play the games to the extent that they go online and try to sell them. And the interest in this is such that marketplaces have evolved. So this is something called MMO Bucks. And you can buy the age of Conan Gold for euros or for dollars. You can buy the Albion online gold, the Anarchy online credit. These are just the A's, but there's a deep market for this stuff. And if you look at these tokens, they are for a single dedicated use. They're only good for being a customer on the platform of these online games. In other words, they work an awful lot like the blockchain based ICOs. I think the main difference is the control of the scarcity of the token itself. That in the case of an ICO, most of these are Ethereum smart contracts, where in a very transparent way, the software is written to limit and put a cap on the number of tokens. And so you know if you acquire a token, you're acquiring something that will be in limited finite supply. I think in these video games, it's up to the game promoter and they can more or less do whatever they want. But you're investing and shouldn't use that word lightly, but you're purchasing something here that may or may not ultimately be controlled with a certain scarcity. Now social media also provides examples of things that look pretty similar to this and Tencent, the social media company in China, has something called the QQ coin that was introduced. This is all the way back in 2007. And the QQ coin functions not terribly differently than these online gaming tokens where you can use it to send gifts to people who are your friends on the platform. You can earn these by doing good things that build the community and so forth. But ultimately it's designed to be a single use token. What the news story is about though is that the demand for these got hot enough that they began to trade in the real economy to the point that the Chinese central bank began to worry about them as rivals to the real money, to the fiat currency. And I think in these two media platforms, the people who created ICOs are clearly borrowing many ideas that were successfully used by media companies and grew probably at a rate and a scale that the companies weren't prepared for. However, it is professional sports that to me seems the real inspiration for this. And let me explain exactly why. You've got on the screen here a diagram of the football stadium that was recently built outside of New York. And this is our football, American football. But this is used by the giants and the jets. And it cost about $2 billion to build this stadium. Now in the past teams were pretty good at getting the local cities to pay to build the stadium, but that has gone by the boards because taxpayers don't like to do this anymore. And as an alternative they could have simply borrowed the money and paid it back with interest or they could have even sold equity to new investors who might have put up the $2 billion. But what they did instead was sell what are called seat licenses. And there's about 80,000 seats in the stadium. And each of these was sold to an investor. They are not tickets to the games. Instead they are the right to be a ticket holder in the future when the stadium is finished. So they are raising money from future customers to finance the construction of the stadium. And in this case about 30% of the cost was financed by tapping the customer base. Now the giants and the jets were not the first team to do this. We've seen these PSLs going back, I think, 20 or 25 years in America. I think they've spread on a more limited basis to Europe. And you see them not only in professional football but also in baseball stadiums and various others. But what you have here is, first of all, clear scarcity. The number of seat licenses is exactly limited to the number of seats in the stadium. And you can be pretty confident there won't be deflation of the currency here. And a critical part of this is that you can trade them on the secondary market even before the stadium is finished. And that's what this website is over here. This is something called the PSL Source. And what you can do is basically buy and sell the personal seat licenses for about 15 different professional football teams. And these go up and down in value based on how the team is doing on the field. Even the weather can affect these and so forth. But there is a secondary market that provides liquidity for the early investors, which is something that you can immediately recognize as being important to the ICO itself. So what is really happening here is the consumer surplus from being a fan of the team is being capitalized here in a transaction that I think is pretty clever. If you're a sports team, there's a problem that occurs over and over again when the team does well. If the Yankees, for instance, make it to the World Series, the baseball championship. In principle, they could sell the tickets for $2,000 each because the demand from New York fans is very intense. But when teams try to jack up the price, they get enormous public relations blowback and even political regulation. People try to step in and limit the ability of teams to price the tickets at the market clearing level where supply and demand would intersect. And I think this is a way of doing it on the sly. That when you invest in a PSL, the cost of the PSL really should be the NPV of the future consumer surplus that you would get above and beyond the ticket price. And this is a way of the teams to take in that revenue on an expected advance basis in a way that they've never been able to get away with in the day to day or week to week ticket market. So I view this as an innovation. This is not debt or equity at all. This is something very different where you find a way to persuade your customers to put up capital in advance for the right to be a customer in the future. And it turns out that this is not really new at all. The first people who did this were the All England Club in 1920 at Wimbledon. So there's something called the Wimbledon debenture. And these seat licenses are for the life of the stadium. They originally called these perpetual, but then people realized that all stadiums are torn down sooner or later. So they're now called personal seat licenses. Wimbledon sells them for five years. And they've been doing this all the way back to the 1920s. And they do it very openly. If you go on the All England Club website, they actually point you right to the market for these debentures where you can see the up to the minute price. So the All England Club is even abetting the marketplace for this. But this, I think, is the origin of the ICO. If you're raising money from future customers, the first people who did this were Wimbledon about 100 years ago. Maybe there's earlier examples, but this is the earliest one that I've with help of some student researchers that we've been able to uncover. We happen to have Mervin King on our faculty at NYU. And Mervin, of course, is the former governor of the Bank of England. He's also a trustee of the All England Club. And so I had the opportunity to discuss these debentures, what's going on, why do you have them. And he said that originally they were launched almost 100 years ago, because the club couldn't get credit that no one would lend them money back in the 1920s. This was a long time before Roger Federer and Serena Williams and so forth, and there was no TV contract back then. And he said that essentially this was the only way they could raise capital, but it was clearly not raising it from the debt markets or the equity markets. It was a very new channel. Now, why have they continued to do it? There are some technicalities about taxation and about the sharing of revenue with the tennis association that make this attractive to the club. And I'm not totally up on the details, but I think this is a way of taking in revenue without calling it revenue for them that works to their advantage. And I think some of this is probably playing into the professional sports in the U.S. Now, you see that I'm referring here to a legal case. That occurred all the way back in 2006. The San Francisco Giants baseball team built a stadium, which is called Pack Bell Park. And they've been playing in there for about a dozen years now. And they thought to go to the SEC, the regulator, and say, we're selling these personal seat licenses. Do you think these are securities? And the regulator looked at this and said, no, these are not securities. And they put out this no action letter, meaning that we will not come after you for doing this. We don't consider you part of our domain. Now, I don't think Jay Clayton knows about this. And I think the SEC today would love to walk this thing back and make it disappear, because given an opportunity and a simpler time with a lot less attention, when they were just asked to look at this on the facts, they said, no, these are not securities. So I want to put on the table one more example. And we're going to come back to this at the last slide in about five or ten minutes. But probably the first ICO in the blockchain world, we all know, is the Ethereum token sale, the Ether tokens back in 2014. So this was the idea of Vitalik Buterin, who needed money to build the Ethereum platform. He needed to pay the programmers and the rent in Zugg Switzerland and so forth. And so they sold, in exchange for Bitcoin, 18 million worth of Ether tokens. And they put out this white paper, which took a pretty aggressive position that Ether is a product, not a security or investment offering. So Buterin was very worried about the disclosure and the liability issues. But he staked out the claim straight off that the Ether tokens were not securities. Now, just because he says they're not doesn't mean it's not really up to the issuer. But at the very least, they wanted to kind of advance this proposition. And I think, I don't want to say a whole lot about this, but they may have been a little bit too clever here, because if you sell somebody a product, you have revenue and you probably owe income tax. Now, they're in Zugg where the tax rate is 8%. But I think everybody who argues that we're not selling securities is actually instead creating an income tax liability for themselves. And this is something that maybe a next year's conference will become a much bigger issue. So I think that this claim is probably very defensible, but it opens the door to what may in the long run be a much bigger issue for these people, that if you're not raising capital in the securities markets, you're actually raising revenue that is taxable income and may be much more expensive for you to deal with than just complying with the securities laws. But let's look at what a security is and is not. And due to my diverse education, I think about this from two points of view. One is as an economist, we teach that a security is a bundle of two sets of rights. I sat in Oliver Hart's course and learned all about this. And any textbook definition says that if you own a security, you get cash flow rights, typically dividends or interests or something like that, and you get governance rights. So in the case of equity, the governance rights basically are voting rights to elect the board. In the case of debt, the governance rights are typically triggered in default, where you can intervene in bankruptcy. But that's what a security is, is really the sum of the value of the two rights, the cash flow right and the governance right. And there's a lot of interesting research by people like Zingales and others about how to disaggregate the price of a share into the voting piece and the cash flow piece and so forth. But this is not a controversial definition. And I think it's pretty obvious that with an ICO, you don't get either one of these things. An ICO has no governance rights, it has no cash flow rights. So it completely fails the economist's definition. What you're getting with the ICO is very simply the privilege of being a customer and you're paying for the expected consumer surplus that you would get down the road from using the platform. That's totally different than the ways Zingales and other people have framed the problem. And if you go back to the white paper from Vitalik Buterin, it goes right in this direction and says, the ether does not give you voting rights over at anything, there's no governance rights. And we make no guarantees of future value. So he's disavowing any investment profits either. So this is a very clever 20-year-old who brought this thing to the market where he seemed to know and to very carefully frame the offer of the ether as not falling within the economist's view of what his security is. Now the other way to think about it is how would a lawyer define a security? And here, every country is free to make its own rules. And what the law is in the US may be different than in Germany, which may be different than Singapore and so forth. But as the media has written about, and I think no one in the room probably heard of the Howie test a year ago, but you've all probably heard of it since then. There's a case that goes all the way back to 1946 called United States versus Howie, where the federal courts laid down a four-part test for what is a security that's covered by the securities laws and what is not. And it's an interesting test, and the first one is that for something to be a security, there has to be an investment of money. Now, most ICO tokens are sold for ether in Bitcoin. And so if the US wants to go into court and argue that these are securities, they have to begin by taking the position that Ethereum is money. And I would find this amusing to see the government lawyers trying to make this point in court. Not the least of which is because they've taken 180 degree opposite position on taxation, where they've held that ether and Bitcoin are capital assets, that they're not money and that you owe capital gains in a way that you wouldn't if you just had euros and Swiss francs in your pocket. So I think that this is a more uncomfortable thing for the regulator to have to argue and we'll see if they ever come to the point of making that argument. But the real issue is the second part of the test, which is why is the person investing in this? And if you're investing due to an expectation of financial profit, you may well have a security. But if you're investing for future consumption, that's a completely different motive. And so if you look at the ICOs that are out there, I think there's two big buckets of them in the world today. One are really financially based. I think a great example would be the tether token, where you can buy something that is supposed to be equivalent to the US dollar, where one tether is one dollar. But there's also gold tokens, and I've heard about real estate tokens. These are basically taking existing financial assets and securitizing them. Something that Wall Street has already been doing for decades. So these security tokens, I think, are securities, without a lot of controversy. But the much bigger group in our paper, it amounts to, I think, 68% of the sample are these so-called utility tokens. Where there's a clear connection between the token and the right to be a customer on a platform, in the same way that the seat license gives you the right to be a fan at the football game. And I think this is a very novel question that when Halle was decided, which is 72 years ago, the idea of raising money from your customers just wasn't on the radar screen. And things like computers and blockchains were not even invented yet and so forth. So at the very least, I think this test is badly out of date. And if the courts are going to ultimately rule on this issue and we'll have to see if that happens, they may invent an entirely new test. But if you take the test as it now stands, as a lawyer looking at this, I see big problems with the first two. The third and the fourth, I think, are probably easier for most ICOs, that there's clearly a promoter and a common enterprise among the people who are putting up the investment. But I think if you're putting utility tokens out there where there's a clear use for future customers, this is something that is very much at odds with the legal test, even as it is at odds with the economist's view of this. So I think the people who are building the stadiums or building the blockchain platforms have found a very clever way to raise capital, but they're doing it in a way that is simply not a security, as we've thought about it in the markets up until now. Now what needs to happen is that Congress needs to write a new law. And this is a much broader point that applies not only to the ICOs, but to all the new crypto property that has come out in the last 10 years. So when you want to think about things like how do we tax Bitcoin and how do we deal with smart contracts, there's just been a huge amount of innovation that does not fit well into existing law. And the tendency of most politicians is to think that we can take the laws that we already have, the agencies that already exist, and shoehorn these assets into the infrastructure that's already there. I think this is a big mistake, because the laws just don't anticipate the problems that are raised by these new things. I think that crypto assets in fact solve many of the problems that have been around in the securities markets for years, but they surely create new problems and they demand regulators with different skills and probably very different mandates. So ultimately I think Congress will do this, and as you go around the world, other countries will also update their laws, but they're playing for time because they don't understand this. Now in the meantime, there's a small set of countries that have been very aggressive, and the two that really stand out would be Singapore and Switzerland. Switzerland in particular has welcomed the ICOs. And as I think everyone knows, the new home of these things is the Crypto Valley, which is this serene lakefront canton where not so many people used to go, but it has increasingly acquired a stream of very highly educated visitors with a tech background, and they're trying very hard to make this the new Silicon Valley. This is the Crypto Valley where the next generation of tech innovation may take place simply because of a more benign regulatory environment. So we have regulatory competition among countries, and I think right now Switzerland rather unexpectedly is being very aggressive and is winning this competition, at least in the West. In the East it's clearly Singapore. And there's a lot at stake here. In fact, if you're the US and you see Switzerland doing this, I think you realize this is revenge for the banking thing that happened a couple of years ago where the US broke through all the defenses of bank secrecy for tax reasons, and now the Swiss are settling the score by trying to steal this whole business. But I think you really can't have people like Jay Clayton banging the drum saying these are all securities and I'm going to regulate them. You need to be much more thoughtful about this. Now, just over a month ago, the head of the corporate finance division, this is not Clayton but one of the people who reports to him, he gave a talk at a conference in San Francisco and really surprised people by taking the position that in his opinion the Ether tokens are not securities. So this is going back to what everyone views as not only the first but probably the most successful of all ICOs was Buterin's launch of Ether where he said Ether is a product, not a security or investment offering. And one of the very top people in the US regulatory scheme agreed with Vitalik and signed on to this point of view. Now, this puts him at complete odds with his boss but I think what may be going on here is the winding down. What I've said is a regulatory retreat that the chairman has gone on record taking a pretty indefensible and extreme position and now leaving it to the deputies to clean up the mess and come up with a more reasonable position. But I took this as a major change in the regulatory orientation of the SEC. If they don't think Ethereum is a security, many, many other things will also not be covered as securities because that's really the touchstone, the reference point for much of this market. So I don't have a particular stake if the US loses this market to Switzerland. I go to Switzerland all the time. I'm happy to visit the crypto valley rather than Washington to see what's going on. But I think the US has realized that they are losing a regulatory battle here against a smarter opponent and there's a lot at stake here. This market is growing so quickly and the deals are growing so big that if you are hostile to them, you're going to chase something very important outside of your borders. And to a new home, I really do think that Switzerland and Singapore at the moment have taken ownership of a market that looks extremely promising. So I wish I had gone to the token summit and I think that everybody who's researching this and trying to understand it is doing something that will pay off not just in a publication in the short term but probably over a period of many years because you see a real innovation in capital raising here that I think in corporate finance this is probably the most important thing in at least 30 or 40 years since maybe the leverage buyout if you wanted to look at something of similar influence and scale. And we'll have to wait and see if I've learned anything from the four or five years I've been studying this stuff is the change occurs very quickly and to even try to guess what may be interesting six or 12 months from now is going to be very difficult. But this is something that clearly in my own mind I underestimated, I think the regulators have greatly misunderstood and it's going to require a very thoughtful approach going forward about how to handle it that in the end is probably going to have to be friendlier to business than has occurred so far. So when you hear that 80% of these are fraud just wrap up by going back to this slide I think this is incredibly misleading because first of all you're not going by the amount raised simply by the number of people who have expressed interest in this. But I think all of entrepreneurial finance sort of looks this way that everybody who starts a new business the large majority are destined to fail. You know it's only a small number that's squeaked through but if you're a diversified investor and you own a little piece of many of these and so forth there's a pretty healthy return to entrepreneurship if you're willing to understand that you're going to have probably nine losers for every one winner. So I'm not sure this data even if it's misleading is particularly disturbing and rather than using it as a basis for killing off the market we should try to figure out what makes companies select into the blue slices here what are the success factors and I think a lot of the papers of the conference today are doing exactly that in a way that I know I've learned something from. So let me wrap up here I think I've pretty much hit my limit in terms of time and we're going to go now into the panel discussion and talk about these issues further. So thank you all for your attention and for the invitation to be here.