Founders of DAOs and Utility Tokens Limits to Crypto Scam

Certain conduct by the SEC in the United States towards Binance has raised the alarm about a part of the ecosystem, which until now has been covered in the veil of naivety.

The special situation utility tokens can cause problems typical of the centralized world.

The ambitions to form decentralized autonomous organizations (DAOs), under the paradigm of the configuration of associative structures without human factor, mark the starting point of the organic and structural grouping of a set of actors that form an organization, but move away from the legal order regulations of companies and associations.

However, the possibility of boosting these DAOs assumes the active role of self-interested members of the ecosystem, which translates into assets of a heritage nature† Hardly anyone wants to form a DAO for faith, spiritual self-improvement or the promotion of love. However, be careful: often the religious/ritic element is a fundamental part of a major scam

Funding a DAO cannot remain anonymous

The formation of a DAO in many cases presupposes the issuance of usable tokens (units of value) obtained through a presale, through the exchange with a cryptocurrency or acquired with a currency of legal tender.

The person holds the token “or company interest” and the alleged DAO – in formation – is funded. This funding cannot remain anonymous, and the audibility of the blockchain does not absolve us from indicating what is visible on the network., this precisely because of the anonymity of the virtual wallets involved and the real value that the utility token holds. This same value must match the value specified in the entity controlling the government revenues of the country or jurisdiction in question.

A utility token must maintain a value relationship that is directly proportional to the amount of the declared balance † this is what makes it possible to legally support any construction of real estate asset tokenization that provides stability and transparency to the user/consumer.

Otherwise, many current constitutional safeguards and regulatory frameworks will be violated if clearly used by users/consumers. After all, the latter will struggle to find clear rules to access the necessary information to assert its rights.

The regulatory pathology of utility tokens

thes companies under construction of a decentralized autonomous organization generally indicate the value of issued tokens as “0” (if they indicate it); holders don’t inform (because they don’t know them, but they should when it comes to utility tokens). They also do not inform about the purchase amounts of the said tokens (although they are visible in the blockchain), sometimes this value is far from the value it should have.

In other words, a utility token must have a strike value; it cannot be subject to supply and demand, as this necessarily involves regulation in this case. Without the latter, the company will have to be fined and reimburse all damages caused to token holders. Likewise, if the tokens are declared at “0”, we are faced with a major tax evasion.

If the token is declared at a fixed annual value (exercise value), the right of redemption, acquisition, exchange and other social and financial instruments must be adjusted to this amount. If not, the true function of a utility token is distorted, which must also lean towards a “nominative” distribution.

The current situation shows that many companies are avoiding regulation and hiding their true goals under the veil of the utility token.† So they add them to DEXs (especially small DEXs) to raise funds through unregulated public offering programs, until the bomb explodes in their face.

Thereby, it is always advisable to have a clear business model with no regulatory cracks before receiving any amount from third parties† Especially when it comes to advertising that invites the user/consumer to be part of the benefits that translate into goods and services emanating from the token in a decentralized ecosystem, when in reality the provider is seeking money and the acquirer of the token seeks financial speculation (winning with the highest possible value).

The new moves that the SEC is giving allow us to warn that in the near future special attention will be paid to any organization using asset tokenization (real estate or not) by issuing utility tokens, without the authorization.

Once that happens, the director, founder, CEO, or whatever name you want to call it… will have to answer for it, with the aggravating circumstance that he has to do it personally. Precisely because it does not enjoy the protection of an adequate type of society; and because perhaps the type of company hides in the social object other objects that make the founder jointly and severally responsible, subordinate and limitless in the economic field.

Use caution when applying asset tokenization business models

I give two tips:

  1. Control the activity or request prior advice (situation that depends on each country where it has a head office).
  2. Make clear terms with the userknow how to correctly define what type of token is being offered.

Otherwise, the scam will be very close.


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