Feds Block Sale of Cryptocurrency by Food Review App Startup
You can’t exchange Munchee’s MUN Tokens for a sandwich just yet
Surging Bitcoin prices have dominated the headlines in recent weeks, prompting alternating prognostications of economic revolution and an imminent bubble. It was perhaps only a matter of time, then, before someone at the intersection of tech and food would want to get in on the cryptocurrency game.
But anyone hoping to get rich off of Yelp-meets-Instagram food photo app Munchee will want to hold onto their cold, hard cash for now. According to Reuters, regulators at the Securities and Exchange Commission intervened to block the sale of the startup’s blockchain-backed “MUN Tokens”, citing that the company failed to properly register the cryptocurrency as a security asset before launching their “Initial Coin Offering” as a security asset.
Munchee’s value-prop centers on getting users to take photos of individual restaurant dishes and write reviews. Post enough of them to the app, and you'll earn MUN tokens, which can be exchanged for food at whatever restaurant is willing to accept them (advertisers on the app could also pay in MUN tokens). To do that, the cryptocurrecy has to have real, redeemable value, hence the “ICO” that Munchees hoped could establish a market while raising $15 million in ‘real’ capital.
That plan is on hold for now, though, as the company has been forced to refund all token purchases made in the two days before regulators stepped in. As SEC chief Jay Clayton sees it, the MUN token saga is the latest example of why the government and the investing public needs more clarity on cryptocurrecy to avoid getting lost in the hype.
When it comes to ICO markets, ”there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation,” Clayton said in a statement, “If an opportunity sounds too good to be true... please exercise extreme caution and be aware of the risk that your investment may be lost.”
It’s uncertain if Munchee will pivot away from its current ‘Yelp, but with rampant currency speculation’ positioning, but their story so far should serve as a cautionary tale for anyone who thinks creating a proprietary cryptocurrency is a shortcut to startup riches. For now, it seems, there’s still no such thing as a free lunch.