We’ve reached the point where cryptocurrencies have become more than just a mere intellectual curiosity or fringe investment. So SharesPost is building GLASS, a global network that will allow investors to trade tokens in a compliant manner even as regulators from around the world wrestle with how to regulate this emerging asset class.
Yet within the crypto community, there is deep ambivalence. To some, the very attempts to regulate and structure cryptocurrencies undermines the libertarian premise behind the technology: a digital asset not beholden to centralized institutions of power like central banks, governments, and Wall Street.
However, creating technology is not the same as popularizing it.
For technology to generate the maximum amount of good for the maximum amount of people, idealism must eventually give away to the logic of a modern economy. That’s why we need rules. That’s why we need liquidity. That’s why we need scale and efficiency. GLASS is meant to provide all of these things.
Alternative currencies have always been rooted in some kind of utopian idealism. Pre-1900 thinkers like Thomas More, Robert Owen, and Samuel Butler saw cash as an obstacle to peace and prosperity because they brought out the worst of human nature: greed, violence, betrayal.
But there was also a pragmatic reason for eliminating cash: financial systems that supported it were too complex and inefficient. In 1887, American author Edward Bellamy published Looking Backward, in which he envisioned a system where the state granted citizens credits they could exchange for goods and services. Specifically, citizens would carry cards with holes that were pricked out whenever they used the credits.
“His work represents the first real attempt by a utopian thinker to tackle the ’money problem’ in a way that does not necessitate abolishing all trade and personal consumption,” Matthew Hollow, now a lecturer at the University of York in Great Britain, wrote in 2012.
“Indeed, for Bellamy, one of the major benefits of his imagined ’credit system’ is that, by cutting out the need for merchants, financiers or exchange rates, it actually makes direct account to account trade both easier and more accurate.”
Bellamy, a socialist, didn’t realize it at the time but he laid down the foundational principles for Bitcoin and Blockchain: a truly mobile, immutable financial system that eliminated errors, fraud, and layers of middlemen, all of which made cash highly inefficient and opaque.
Bitcoin, however, wanted to remove not just middlemen but the entire role of the governments from the currency. Satoshi Nakamoto, who created Bitcoin in 2009 during the teeth of the Great Recession, capped the entire amount of Bitcoin at 21 million. That move was a response to central banks like the Federal Reserve printing more money to combat the recession, a decision that alarmed some economists who feared the bank was artificially inflating the economy.
But the notion that regulators and Wall Street would just leave Bitcoin alone seems unrealistic. Bitcoin currently enjoys a market cap of $115 billion. And where the money flows, the feds and banks will follow.
Even utopians like More realized transforming a cash-based economy requires “a fundamental reorganisation of society,” Hollow wrote.
Bitcoin might have fell short of its lofty ambitions but it gave credence to the idea that digital currency could occupy a prominent place in our global economy. I’m specifically referring to utility tokens, which in some ways better reflects Bellamy’s ideas than Bitcoin.
Bellamy’s credit card system was directly rooted in the goods and services the holders could receive, “rather than to some artificial carrier of value (such as gold or silver),” Hollow wrote.
“Not only (Bellamy’s system would) provide consumers with a far more portable and convenient payment method than that offered by conventional notes and coins systems,” he wrote, “but also enable both purchasers and sellers to more accurately keep track of their accounts.”
With a utility token, a user can directly exchange the asset for a good or service, just like Bellamy’s credit cards. And Blockchain’s distributed ledger technology ensures the veracity and security of those transactions. Last year, the total value of tokens grew to $37.7 billion, a nearly 19,000 percent increase over 2016. Companies and investors raised $5.4 billion last year by selling tokens through initial coin offerings.
However, many crypto trading platforms around the world struggle to generate enough liquidity to serve their local markets. And since investors can earn profits from trading tokens on secondary markets, regulators from different countries seem set to regulate them as securities.
To preserve the crypto revolution, GLASS will create liquidity by pooling together buyers and sellers across the world. The network will also ensure these sales comply with local regulations that might deem the tokens in question as securities, no matter if the transaction occurs in the United States and Great Britain or Singapore and the Phillipines.
In many ways, GLASS balances both the utopian nature of cryptocurrencies with the realities of a modern economy. For tokens (and the ideas they represent) to reach their full potential, we need to scale them into stable, regulated markets across borders.
Despite crypto purists’ reservations, thanks to GLASS, we’re moving closer to achieving a society based on principles envisioned by utopian thinkers more than 200 years ago.