Q.) In our community Telegram it was asked by @TDotD "[I]s GEN a security?"
A.) Answered by @Matan [DAOstack Architect]:
To the best of my legal understanding (and perhaps @robertoklein [Roberto Klein, DAOstack CFO] can add on this), there’s no relation between the manner the proceeds will be used and nature of the GEN token.
As far as I can tell, in its nature, GEN is a utility token, but on the other hand this is not an official statement in any jurisdiction, and more so, we operate under the (more restrictive) assumption that the GEN would be treated as security in the US (which is the default unless appoved otherwise), and thus fully comply with the RegD US procedure (meaning, selling tokens in the TGE and earlier sales only to accredited investors in the US. Selling to everyone in all other jurisdictions).
@CaptainN3m0 followed up with: "How many tokens per ETH ? Are tokens pegged to ETH or USD[?]"
GEN are denomindated [sic] in (~ pegged to) ETH. Which means you’ll get X GENs per ETH. X shall be defined at the day of TGE by the ETH-USD rate of that day + data from early-purchasers bonuses & amounts, to fit the statement that:
40M GEN will be sold for a total of $30M over all sales.
Roughly, it’ll lead to something like 1 GEN for 0.8-0.9 at the public sale. (And again, exact number in will vary according to the exact figures of private sale and bonuses, and denomination in ETH will vary according to ETH-$ rate at TGE.)
But most importantly, once again, GEN are denominated in / pegged to ETH, so that X ETH will give Y GEN irrespective of ETH-$ rate at the time of purchase or variation thereafter.
@cgolasangi followed up with: ETH price has dropped significantly so it wont be anymore than $450 in the best case, so to meet $30mil you will have to raise twice the ETH so its more or less pegging to USD …when ETH price increases which it will in the coming month people who bought tokens now will be under loss and if they buy and hold eth now and purchase at exchanges
The purchase of GEN tokens is pegged to ETH. This means that during the entire sale process (private, pre, public), when ETH goes up you gain and when ETH goes down you lose —just as you would so if you would be holding your ETH.
This is the natural thing to do for a purchasing audience of people who usually hold their funds in ETH. Clearly, it’s in tension with people who usually holds their fund in $, as for them pre-purchasing GEN tokens is like purchasing (or be invested in) ETH, and if they would wanted to do so they would be holding their funds in ETH.
But since we estimate that most of our natural audience’s capital is held in ETH we chose that way. And note that choosing the other way around would be in tension with those people who does hold ETH
The other thing is that the entire sale cap is denominated with $. Although somewhat confusing it does make sense and is pretty much the industry standard.
The implication of that is that if we close tomorrow $15M, and the day after the ETH price goes 2x, we’ll need to close the sale (and skip the public round). On the other side, if we raise $15M and the day after the ETH price goes 1/3x, we’ll have a long way to go to fill the cap
@dancube followed up with: "What if you hit your cap before the presale time due to a rise in the price of eth, but then it goes back down again? Would the sale just be ‘tentatively’ on hold until the date arrives?"
Good question. Full disclosure: we haven’t yet decided about it (but will do so soon). The decision goes together with the decision of the amount of ETH to convert to USD for hedging against the ETH-USD variation. If we decided to convert the entire fund to USD on the day of closing the sale, then the question is no longer relevant. If we decided to keep the entire fund in ETH, then you have a good point. Hope to bring an update on that very soon.