The U.S. securities regulators’ control of cryptocurrencies has not dissipated, but intensified – The Securities and Exchange Commission (SEC) tightened its fraud for the first time in the issue of tokens (ICO), according to The Wall Street Journal, Has issued a large number of summons to industry players suspected of violating securities laws. This is because the SEC has been worrying for months, and some ICOs are raising funds for those non-existent businesses.
The Wall Street Journal reported that the SEC issued a subpoena to get information from technology companies and consultants who are involved in the cryptocurrency market.
Most ICOs are securities
CoinDesk data show that the ICO market has become increasingly hot in the past year. The SEC is therefore concerned that in many cases, some investors with smaller financial resources have not adequately studied the risks associated with the ICO. In addition, the Wall Street Journal quoted sources as saying that the SEC is investigating the structure of the ICO, in part because the ICO does not need to follow as many provisions as the IPO.
After the news came out, major cryptocurrencies, including bitcoin, etheric and ripple, crashed.
SEC spokesman Judith Burns did not immediately respond to a call seeking comment. However, the Daily Economic News reporter noticed that SEC chairman Jay Clayton has been critical of the ICO’s fund-raising practices. Clayton has also said on many occasions that the vast majority of ICOs should register with the SEC because these cryptocurrencies are traded on the secondary market just like any other SEC-regulated securities, but the ICO has been slow to accept SEC regulation. In an interview in January of this year, Clayton promised that “if the ICO company does not change the way it operates,” more will be sanctioned.
In addition, in early February, when Clayton made a speech in the U.S. Senate, most of the ICOs are securities. Clayton also said at the time that he was concerned about the regulation of the types of crypto-assets under the SEC’s current currency trading framework.
In a speech to the Senate, Clayton said “Investors are entitled to the protection of state and federal securities laws when they participate in securities transactions, and this is true of investors involved in the ICO. In addition, ICO financing Both the parties and the market participants must abide by these laws and we are willing to discuss with Congress and other countries whether there is a need to strengthen the federal government regulation of cryptocurrency trading platform.But we also support the regulatory and policy aspects of the promotion for the ICO And greater transparency in the cryptocurrency space. ”
“Many ICOs are unlawful and the ICO companies do not comply with the securities law, and some say this is because the securities laws do not explicitly state the ICO and we do not think so.” Clayton The Senate added:
How to manage is not clear
The Daily Economic News reporter noted that ICO has been a controversial fund-raising model ever since its inception, and that securities regulators have sounded countless warnings to ICOs. The SEC warned before that it was not enough for a tokens issuer to classify cryptocurrencies as “utility, utility” categories, enough to circumvent the federal securities laws.
But beyond the SEC, it is unclear how ICO and cryptocurrency will be effectively regulated. For the time being, the cryptocurrency trading platform is not under the jurisdiction of federal agencies such as the Commodity Futures Trading Commission (CFTC). In contrast, these ICO-financed companies are licensed and regulated at the state level. In addition, although the SEC is tightening its regulation of ICOs, ICO’s financing model is not in the regulatory framework for stock IPOs.
Ordinarily, in the ICO process, a company sells digital currencies that can eventually be redeemed for goods and services. ICO allows companies to get millions of dollars from investors. For example, a telecom application operator called Telegram is trying to raise $ 1.2 billion by issuing tokens.
The SEC has already made a number of cases involving the ICO, including allegations against a Texas-based company in January of this year, claiming that former Boxing Champion Evander Holyfield (World Class Champion ) Successfully raised 600 million U.S. dollars as a celebrity spokesperson. The SEC said the company, known as AriseBank, allegedly raised funds illegally from investors without filing with regulators.
The Daily Economic News reporter also notices that in the past year, the rise of cryptocurrencies and ICOs has caused soaring prices of major digital currencies such as Bitcoin and Ether. According to Autonomous NEXT, a financial technology analysis provider, in January 2018 companies in the industry raised a total of $ 1.5 billion through ICOs. In 2017, this figure is more than 6.5 billion U.S. dollars.