After Bitcoin [BTC] ETF silver lining, SEC puts forth circular on ICOs

  11 Feb 2019

The Securities and Exchange Commission [SEC] of the United States of America has been a major factor in the acceptance or denial of cryptocurrencies in the country. The body has intervened in several developments and updates, citing regulations and laws that will be a key component in pushing cryptocurrencies such as Bitcoin [BTC] into the mainstream realm.

In the latest report published by the SEC, the regulatory body talked about Initial Coin Offerings [ICOs], the rules and procedures behind it as well as the main issue of legitimacy, one of the most recurring topics in the field of cryptocurrencies. The report starts by stating:

“Companies and individuals are increasingly considering initial coin offerings (ICOs) as a way to raise capital or participate in investment opportunities. While these digital assets and the technology behind them may present a new and efficient means for carrying out financial transactions, they also bring an increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.”

In the report, the SEC has also given a detailed list of the five things that a user needs to know about ICOs. They have stated that ICOs can be security offerings and can fall under the SEC’s jurisdiction of enforcing federal securities laws. The SEC also added:

“ICOs that are securities most likely need to be registered with the SEC or fall under an exemption to registration.”

The clause is important because of the SEC’s tussle with the Bitcoin ETF, which were pitched by the Winklevoss brothers as well as the VanEck Bitcoin ETF. The VanEck Bitcoin ETF was also in the news recently when they stated that they withdrew the ETF application because they “didn’t want to slip through the cracks”.

The firm has claimed that this decision was triggered because of the US government shutdown. The SEC’s latest release also claims that tokens sold in ICOs can be called many things. To elucidate:

“ICOs, or more specifically tokens, can be called a variety of names, but merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.”

The governing body has further commented on the security risks that come along with the ICOs. There has been a clear mention of the fraudulent nature of some investments while there are others which are honest investment opportunities. According to the SEC:

“They may also present substantial risks for loss or manipulation, including through hacking, with little recourse for victims after-the-fact.”

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