Circle Internet Financial Ltd, a Boston Massachusetts-based fintech firm, recently acquired equity crowdfunding company, SeedInvest, in order to make it easier for startups to raise capital with cryptocurrency. Jeremy Allaire, the co-founder and CEO at Circle, explained that the acquisition would help the company provide financial services in a future economy where “there’s going to be this tokenization of everything.”
During the Security Token Academy conference held in Manhattan, New York, Allaire told CNBC: “Eventually these marketplaces will have tens of thousands, if not hundreds of thousands of assets, so the next piece was a [licensed] broker dealer,” which is why Circle acquired SeedInvest.
SeedInvest Is A “Cousin” Of ICOs
Allaire, a political science and economics graduate from Macalester College, referred to SeedInvest’s crowdfunding process, or approach, as a “cousin” to how cryptocurrency-related startups raise capital through initial coin offerings (ICOs).
SeedInvest’s web-based portal connects startups with potential investors, which is something that Circle will now use, in addition to the equity-fundraising platform’s broker dealer license, to further expand its operations. Circle and SeedInvest’s business agreement has not yet been approved as it’s still being reviewed by the US Securities and Exchange Commission (SEC).
Fully “Tokenized” Future Economy
While Allaire seems to believe even traditional equities like common stocks will be “tokenized” in the future economy – which is reportedly why Circle acquired cryptocurrency exchange Poloniex in February – NYU professor and cryptocurrency critic Dr. Nouriel Roubini thinks having a token for everything is a ridiculous idea.
During the Fluidity Summit held in May of 2018, Roubini said that “leaving aside the legal issues, as most people think [crypto tokens] are non-compliant securities, … studies show 81% of ICOs were/are [total] scams [and] another 11% of them [have failed] or are failing (or dead). Only 8% of them are traded on exchanges.”
Additionally, Roubini noted there are “two fundamental [economic] problems” with having thousands of crypto tokens – which is why “they are going to fail.” He explained:
If you are any venture that wants to maximize profits by selling goods or services … the last thing you will do is restrict the ability of anybody to buy those services by first having to buy a token. Why should I buy a token as opposed to using the USD or the Euro?
Crypto Token Issuers Are Like “Illegal Cartels”
The only reason you would want to do it … economically if you want to create a cartel that is gouging customers … like they created DentaCoin [which] is supposed to be cartel of dentists, so you have to use them as opposed to anybody else. So these are not only non-compliant securities, they are [also] illegal cartels that are gouging customers.
The NYU professor then elaborated on the second economic problem with crypto tokens which is that they don’t have a proper unit of account. He explained:
Unit of account is used so that [people] know what is the relative price [like if something] is priced in dollars. In a world in which every good and service has to be bought with a different token, [people] have no idea what’s the relative price of goods. What’s the difference between three Dentacoins and three Dogecoins? What’s the relative price of that? It’s totally confusing … it’s totally inefficient and it’s never going to work.