After a tumultuous week for chat messaging app Kik, CEO Ted Livingston took the stage at #ElevateMoney Stage (programmed by BetaKit) to talk about the regulatory fight against digital currencies.
Earlier this week, BetaKit was first to report Kik’s official announcement that the company would be shutting down its app and had reduced its headcount to just 19 people.
“This is a race to build new global money. I would not take the bet that the government is going to stop that.”
– Ted Livingston
Livingston said at the time that Kik planned to focus its efforts toward the company’s cryptocurrency, Kin and that the company remains committed to fighting the United States Securities Commission (SEC) in court. News of the layoffs and app shutting down quickly caught the interest of people and media outlets globally, begetting more questions about the future of Kik. At #ElevateMoney, Livingston explained that the fight against the SEC had become incredibly expensive and that running the Kik app cost $1 million a month.
“We soon came to the realization that we can’t afford [Kik]. This was the hard part,” Livingston said. “When we looked at all the options, we said we need to shut this down. By focusing on Kin, [we’re hoping] we can help save everything else.”
Livingston also argued that Kik’s app was more engaging than SnapChat, Twitter, or Instagram and was one of the biggest apps in the United States, but the difference between the Waterloo-born app and other social media giants was money.
“There was just one problem, we didn’t have a good way to make money,” he said. “We were competing against a bunch of competitors whether it’s WhatsApp, Facebook Messenger, or Telegram, or iMessage, that didn’t make any money either. But they have one big advantage, which is they had a rich parent or a rich uncle who had a monopoly sitting in the basement churning out cash, that was able to fund this not-for-profit they had in messaging.”
The SEC began investigating both Kik and the Kin Foundation after Kik officially launched Kin cryptocurrency in 2017. When the SEC officially filed its lawsuit this past June, it dropped the investigation into the Kin Foundation, focusing solely on Kik and its initial coin offering (ICO), which raised $157 million CAD. In its filing, the SEC accused Kik of misleading investors about the nature of Kin and violating regulations by selling Kin without registering the token as a security. Kik’s response in August was detailed and poignant, accusing the SEC of mispresenting evidence.
“The SEC is not saying Kin is a security,” he said, noting that the SEC is only concerned specifically with the ICO. “This is where they’re just flawed… The SEC is calling this a hail mary. You can’t call it a hail mary if everyone is running the same play.”
Livingston stated that there are challenges with being a first actor like Kik has been, noting that since launching its cryptocurrency other players like Facebook have announced intentions to do the same thing.
He also noted that when Kik was ready to launch its ICO, Canadian regulators told them they weren’t sure if Kin was a security or if the Howey Test applied and Kik decided not to make its offering available in Canada. But in the US, Livingston argued that the SEC was then and continues to be unclear and slow to make decisions about new forms of money and how they fit into the security regulations.
“Despite these [recent] hard decisions, my confidence in Kin only continues to grow.”
He said the company’s advisors are backing the decision to drop the Kik app to fight the SEC, and he is still confident of the company’s chances to win the case, adding that Kik already spent millions cooperating with the SEC in 2017, despite the fact that, in Livingston’s opinion, the SEC wanted to drag it out instead of finding a solution to regulatory issues.
Earlier this year, Kik also allocated $5 million to its fight with the SEC, launching a “Defend Crypto” fund in May. The Waterloo-based company committed its own $5 million in Bitcoin, Ethereum, and Kin to fight its legal battle, looking to raise more funds from outsiders. However, funding for its legal battle didn’t pan out, with the Defend Crypto fund evolving into a separate fund to financially support “other projects outside of Kik” that are also “impacted by the regulatory uncertainty.” Kik moved its $5 million into a separate account to support for its legal battle, relinquishing governance of the original fund to the Blockchain Association.
Livingston has previously stated that he was confident Kik would win its SEC case, and says he’s still confident in its outcome. He has also previously argued that losing the case would be disastrous for the crypto community.
“Despite these [recent] hard decisions, my confidence in Kin only continues to grow,” Livingston said in Monday’s blog post. “Together we will show the power of the Kin Ecosystem. Together we will get millions of people to buy Kin to use it. And together we will build a new economy that offers equal opportunity to billions of people. Together we will win.”
“Yesterday we announced that [Kik would reduce] from a team 150 people to a team of 19, and we’ve gotten thousands of messages from users saying you cannot shut this down,” he said. “It’s hard and that’s why for us we have to keep in this fight.”
The CEO likened the SEC and regulators trying to shut down digital currencies to shutting down the internet. A win-win for Livingston would be creating regulations that protect consumers from fraud and scams but also allow for innovation. He said he truly believes cryptocurrencies are the only tool we have to rewrite rules on how wealth is created and distributed in society.
“This is a race to build new global money,” Livingston said. “I would not take the bet that the government is going to stop that.”
He also added, “until we don’t have a dollar left, a person left, Kik will keep going,” noting that he believes Kin will be the most valuable currency in the world. “Kin is going to continue to run forever, it’s just a matter of how many people will use it.”
With files from Meagan Simpson