In a lengthy December 11th statement, the Securities and Exchange Commission Chairman, Jay Clayton clarified a number of the SEC’s positions on ICOs and crypto in general.
The statement gives the most detailed explanation to date on the SEC’s stance towards cryptocurrencies. Moreover, given the Trump administration’s relative disregard of blockchain technology, it’s given investors and developers the clearest indication of how regulation might pan out in the US going forward.
From the SEC’s perspective at least, it’s looking optimistic. In his memo, Clayton holds that the “technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing,” and he “encourage[s] Main Street investors to be open to these opportunities.” Regarding ICOs, he believes that they are an effective method to “raise funding…for innovative projects.”
Still, the SEC chairman made a point to warn investors about the possible pitfalls inherent in investing in such an unregulated market. Above all else, he issues caveats regarding scams and market manipulation, and he charges his readers to do diligent research, ask thorough questions, and judge an ICO’s validity before investing.
ICOs, Even with Utility Tokens, Treated as Securities
Perhaps the key clarifying feature of Clayton’s statement is the regulatory label he assigns to the vast majority of ICO projects.
On this point, Clayton believes that ICO’s must be treated on a case-by-case basis, but he believes the lion’s share of them should be handled like securities:
By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws.”
Going forward, this means that ICOs would either need to prove that they do not function like a security or follow the formal securities registration process and legal guidelines.
Concluding his statement about ICOs, Clayton indicated that he has directed the SEC’s Division of Enforcement to “police this area vigorously” and to take action against any ICO not operating within federal securities laws.
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