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One crypto area that the U.S. Securities and Exchange Commission (SEC) was quite obscure about so far is initial coin offerings (ICOs). Sure, The SEC Chairman Jay Clayton has already expressed his opinion in the past that ICOs should be regarded and treated more as securities than utilities, but the agency’s general perspective of this sort of funding method remained elusive. In fact, the SEC’s approach to ICOs (and the crypto market in general) was so ambiguous that members of Congress demanded some clarifications about it.
Recently, in a speech Chairman Clayton finally offered some additional insights about the issue.
Clayton began discussing ICOs by raising the concern that while this field potentially holds “greater opportunities” it is also far more open to “fraud and manipulation”; and compared with other markets, it is much less regulated. Yet, Clayton did not disqualify ICOs as a whole, and did offer an olive branch to the crypto industry.
I believe that ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed.
There you have it, then. The SEC Chairman clarifies that the federal protection agency he’s heading does not view the ICO market en masse as a sham, and he even admits that ICOs may constitute as a legitimate effective method of financing; yet, with that assertion, Clayton also distinctly elucidates that – at least from the SEC point of view – ICOs should fall under securities laws.
Clayton then went on to describe the SEC effort to reach out to crypto entrepreneurs and innovators that was launched in October – the Strategic Hub for Innovation and Financial Technology, or FinHub. He subsequently finished his segment about ICOs with an appeasing tone.
As the FinHub and our other activities demonstrate, our door remains open to those who seek to innovate and raise capital in accordance with the law.