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Lightbulb Capital’s Dan Liebau: Closing Your Token Sale Is the Start of Your Journey, Not the End

With crypto industry gaining considerable attention, regulators all around the world are becoming increasingly aware of the need to reassess their somewhat blunt regulatory approaches. To discuss crypto and securities markets and analyze challenges of traditional versus digital asset market regulations approached Dan Liebau, the founder of financial research and consulting company Lightbulb Capital based in Singapore. What are your professional interests? How would you describe your role in the financial ecosystem?

Dan Liebau: I am the founder of Lightbulb Capital, a research and advisory firm focusing on Innovation in finance. Lately that means spending a lot of time on all things blockchain. We do work with large established financial services firms but more and more action has actually moved to the startup ecosystem where smart people have revolutionary ideas and leverage the distributed ledger to change the world by entering spaces like financial inclusion or clean energy which we’re particularly interested in. We are also active in the education space and work with Universities (IE business school and Singapore Management University). We are now starting to engage Associations (BBA in the UK and ACCESS in Singapore), too. I see us as one of the many “nodes” contributing to the progress of the blockchain ecosystem that is developing at the speed of light – and we do that not for any short-term gains but for what’s in it in the long run. What excites you the most about crypto and securities markets?

Dan Liebau: I started my career in Financial Services Technology in 1999 when most of the global trading activity had just migrated from the traditional floor to the computer. It was a fascinating time. One of the things that I believe is most interesting in the markets is the behavioral aspect of it all. Securities markets are obviously a lot more mature than the digital asset markets but a lot of the behavior is quite similar. People display greed and fear, for example. What do you think about the traditional securities market regulation? Is it outdated?

Dan Liebau: I am not a lawyer or a compliance officer but over the years I have learned why some regulation has been put in place. Rules have been implemented to manage the behavior of some of the actors in the market. Take greed, for example: if not managed properly, it drives people to act in an unfair way. Unfair means bad actors will exploit an (information) advantage to earn money at the expense of another market participant. If market structure can be designed in such a way as to make this unfair activity impossible, I find that a good and ethical objective, regardless of whether there is regulation in place or not which in the crypto markets often means regardless of whether it is a utility token or a security. Regulation that addresses moral hazard and upholds good values for humankind like fairness is a great thing.

The emergence of utility tokens as a new asset class gives everyone an opportunity to reassess the current regulatory framework. Digital assets can be infinitely divided and therefore distributed in small pieces to a mass market with very little cost. This is new and important, and raises the valid question: why do regulators deem certain securities too risky for “unsophisticated retail investors” while governments are happy to peddle state lottery tickets to the very same people? It really doesn’t make sense and the blunt regulatory approach which was designed with good intent (to protect the public) needs reassessment in the light of new technology which makes it possible to distribute assets in small amounts very broadly and democratically. What are the biggest challenges the markets, both conventional and crypto, are facing today?

Dan Liebau: Digital asset markets are at a very early stage. There is a lot of work to be done. That’s exciting and mind-boggling at the same time. Some of the biggest challenges I have listed in the below table:

Traditional Market ChallengesDigital Asset Market Challenges
Overly complicated regulation creating barriers of entry and thus excluding entities and individuals from access to financing and investment opportunitiesToo little regulatory guidance and frameworks allow bad actors with questionable ethics to manipulate markets and treat others unfairly
High cost per trade due to the involvement of many actors in the settlementUnclear how to manage custodial services for digital assets (including what happens if a person dies) at industrial scale
Time to settlement is often T+2 or longer, which means that capital is locked up during this period creating a large opportunity costInteracting with markets is still quite complicated, requires participants to be technically savvy and hence excludes another demographic, which is older folks Why is Singapore so popular among cryptocurrency exchanges and blockchain startups? In your opinion, what are the most attractive aspects of this jurisdiction?

Dan Liebau: Singapore is a financial services center competing with other top financial centers of the world. With the MAS (Monetary Authority of Singapore) the country has one of the most forward thinking regulators when it comes to fintech and Innovation in finance. While not all guidance and regulation is issued first, Singapore understands very well the advantages of the fast follower model. The fact that Singapore is an AAA rated country, has a stable economy, corporate law and tax rules that support startup companies as well as small and medium enterprises make it an ideal place to implement a fintech idea. What is still badly needed is guidance from the regulator to banks as to how they should interact with blockchain-related startup business, as it is almost impossible to get a bank account in town when you work with crypto. The recent consultation paper on Regulated Market Operator regulation by the MAS demonstrates that we are heading in the right direction. Speaking of the MAS, it has recently warned eight digital token exchanges in Singapore not to facilitate trading in digital tokens that are securities or futures contracts without their authorization. It has also issued an order to one particular ICO company to stop offering their digital tokens in Singapore. Are there any chances that the MAS will regulate all blockchain-based tokens as securities? What would be the consequences of such an approach?

Dan Liebau: There are always some chances of that, but better than speculating is to stay close to the regulator’s actions and support them where we can. Personally, I do not find the SEC’s approach, meaning that every token is a security, a bad one. At the same time, I believe that we have a great chance at the moment to take a pause, step back and evaluate what is really required to enable a fair and smooth securities offering. There is a considerable scope of securities regulations to refine and improve in order to reflect what is now technically possible with digital assets and crowdfunding. The current process might have a great room for improvement. Last year Japan was going to introduce its own cryptocurrency J-Coin. Is this plan still a thing? In your opinion, what would be the pros and cons of a government-backed national cryptocurrency in general and for Japan in particular?

Dan Liebau: It is commendable that governments are experimenting with blockchain technology to understand the implications better. If one thinks about the original idea of value transfer and the ethos behind the Cypherpunk Manifesto of 1993 it is not immediately obvious why such government-backed coins would be of use. There are however, interesting projects that address immediate issues such as a facility to go “risk off” in the markets and store value safely. Projects like Clearmatics are working on addressing this matter at global scale. Other efforts by independent thinkers to create so-called “stable coins” offer an alternative to the fiat-backed efforts. As the ecosystem develops extremely swiftly it will remain very important to monitor new developments constantly.

I don’t really consider a central bank issued digital currency that is recorded on a private blockchain to be an actual cryptocurrency. Such an instrument offers the potential for smoother interaction between fiat and genuine crypto currencies, but it is far from certain that central banks have such an objective. Their primary incentives in creating such instruments include obtaining better information on the use of their currency; reducing dependence on cash; and improving the efficiency of settlements in the banking system. These are quite different incentives from those typically cited by creators of cryptocurrencies. What can you advise to technology projects aiming to fundraise via the token sale / initial coin offering?

Dan Liebau: A couple of things actually:

  • Don’t develop your own token sale platform but work with a reputable exchange such as the Gibraltar Blockchain Exchange and their GRID platform [disclosure: Lightbulb Capital Digital is a sponsor of GBX].
  • Don’t cut any corners when it comes to legal or regulation issues. This will not only save you time and money but also keep you out of prison.
  • Don’t work with advisors that ask for unethical upfront fees in cash; structure an advisory relationship agreement that makes sure they too have skin in the game.
  • Don’t raise funds via the ICO / Token Sale if there is not a clear reason why your project needs blockchain technology, and if your token has no real utility.
  • Aim to be inclusive, support others, create a community and network and when you define your token economy don’t forget David Lee’s 4Ds.
  • Stay away from bad actors, and conduct KYC/AML thoroughly, even if you get offered a lot of money.
  • Familiarize yourself with best practice in traditional financial markets or find a partner to support you in this. The ICO, while currently unregulated, is basically a fundraising activity, and it is highly likely that the principles that apply in current regulated markets will be ported across into token markets in some way or another. While there may be no look back at some aspects that are currently unregulated, fraud will remain an unethical thing and a crime regardless. Do not commit fraud wittingly or unwittingly.
  • Be transparent about your strengths and weaknesses and do not exaggerate what you have.
  • Remember that closing your token sale is the start of your journey, not the end.


The need for adequate regulatory approach is obvious. As a well-developed country with stable economy, Singapore can afford lots of experimentation with financial technology and it makes it a perfect place for cryptocurrency and fintech blockchain startups. Yet, even in Singapore authorities haven’t yet found the fabled cornerstone of cryptoregulation.

The world is still somewhere in between the traditional strictly regulated market and the wild frontier of crypto, where questionable ethics and greed thrive without regulatory pressure. It is important to pass this stage as soon as possible, and draft the rules that would put a lid on hampering innovation while keeping bad actors at bay.

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