ICDevs Votes on SNS and NNS Proposals
Just a quick update from ICDevs as we know we have a lot of people following us that “Inherited” following us on the SNS topic.
TLDR: We will start voting “Reject” on all SNS and community fund topics. You may want to follow us or unfollow us on that topic depending on your risk preference/nationality. We will also begin to “Reject” updates on the Network(System) Canister Management topic proposals for canister qoctq-giaaa-aaaaa-aaaea-cai (NNS front end) as long as it includes token swap functionality. Again, you may want to begin following ICDevs on that topic if you are under certain risks.
ICDevs is a 501c3 non-profit and as a result, must comply with US-based laws. According to our analysis, the way the SNS has been deployed in its current iteration constitutes putting NNS participants in flagrant violation of SEC guidance as issued in the 2017 DAO Opinion:
“Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection.”
In our opinion, voting “accept” to launch a token sale may be viewed as “participating” in an unregistered offering for us or the people that follow our neuron. As a result, we will in the future vote “reject” on all SNS and Community fund proposals.
Further, since the NNS app hosted at https://nns.ic0.app now enables the swapping of ICP for potentially unregulated security offerings we have to be careful not to actively participate in enabling that, so we will begin to vote reject on all Network(System) Canister Management topic proposals for canister qoctq-giaaa-aaaaa-aaaea-cai (NNS front end) that include the launch pad functionality). If you have concerns about this as a US Citizen or someone that may want to travel to the US in the future, you can follow us on that topic and we will continue to accept other System Canister management requests and only(at this time) reject the NNS Front-end requests.
While we are incredibly excited about the functionality of the SNS and the launch pad and the world they could enable, we believe that putting the NNS in a position of pro-actively launching token sales and publishing a swap marketplace places the entire NNS site in the crosshairs of regulators that could demand that US-based boundary node block access to the nns.ic0.app domain name cutting off access to hundreds of ICP and NNS users. This seems like an entirely undue risk when NNS token launches could(and in fact can be) launched by manually installing the code without the help/approval of the NNS and the launchpad could be published to the IC without the need for NNS approval(as a standard IC frontend canister).
We aren’t happy about this and wish the US government would be more descriptive and exact in their guidance on what does constitute participation. We do have to deal with reality though and we believe that given current the regulatory environment we should do what we can to protect our access to the ICDevs treasury and advocate for the protection of the funds that IC Developers may have locked into an interface that may become inaccessible.
While we will be unlikely to vote to approve SNS launches in the foreseeable future until we see regulatory guidance, we are excited about SNS as an enabling technology with IC.
FAQ:
Q: What is the actual worst that you think could happen?
A:Worst case: The Executive Director, Board of Directors, and Developer Board end up in jail as participants as ICDevs voters to launch the sale of unregulated securities and ICDevs is asked to provide records on followers of our neurons. NNS.ic0.app is blocked by US boundary nodes for selling unregulated securities US citizens and US ICP holders lose access to their neurons.
The fact that these are not technically correct or possible is irrelevant because the regulators could likely be trying to make an example and they have the power to do so.
Q: What would enable ICDevs to begin voting Accept on new NNS Front end votes?
A: Removal of the Launchpad functionality that allows the swapping of one Token for another.
Q: What would enable ICDevs to begin voting Accept on new SNS token launches?
A: The US government would need to give more strict guidance on what “participation” is and what constitutes legal participation in token launches.
Q: Won’t the “wisdom of the crowds” keep offending SNS tokens from being launched?
A: The fallacy of this assumption(to me) that the NNS will be a filter is the belief that the community can self-regulate and self-discern what is a utility token from what is a security and/or what is a useful new protocol vs what is a Ponzi scheme. Further, there is nothing to keep a protocol from going ponzi after approval and undoing the diligence the community attempted beforehand. The public won’t care…they will just see the next Luna or FTX and point at the people that voted to approve the sale as having violated any number of SEC regulations.
The fact that the NNS is becoming a storefront for advertising these things is an even more flagrant nose-thumbing at the specific rules against doing that. I know we have a genuine, hardy, and justified opposition to the current status quo in the regulatory space, but there is a reality to deal with and if we’re going to engage in civil disobedience we need to be very clear that that usually ends up with people in jail and significant legal fees. It is unlikely that everyone using the NNS has that level of buy-in and it seems…unfair?..maybe even unethical? To drag people into that that don’t know what they are getting into.
