Why is the Newest SEC Statement Important for Initial Coin Offerings and the Crypto Space?
The U.S. Securities and Exchange Commission (SEC) released a statement in which the agency informs that Initial Coin Offerings (ICOs) must be compliant with securities laws. Two ICOs that have been sanctioned for selling unregistered securities are Paragon and AirFox.
Each of these ICOs will have to pay a $250,000 dollars’ fine and compensate investors that purchased the tokens they were selling. At the same time, these ICOs will have to file periodic reports with the SEC. Both of the firms agreed to register their tokens following the Securities Exchange Act of 1934
However, the SEC released another statement on Digital Assets Securities Issuance and Trading. This statement explained that the SEC and regulatory agencies are not against emerging technologies such as blockchain. However, they informed that market participants have to adhere to federal securities laws when working with technological innovations.
The statement released by the regulatory agency reads as follows:
“We wish to emphasize, however, that market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies such as blockchain.”
The SEC has also decided to issue specific guidelines on Initial Coin Offerings. Some initial coin offerings should be considered as security offerings and need to be registered in this way. At the same time, the SEC advice users and investors to make their own due diligence and analysis.
In a recent blog post uploaded by Anthony Pompliano, Founder & Partner at Morgan Creek Digital says that the enforcement actions against the ICOs are very negative for the whole ICO market and for the crypto space.
These Initial Coin Offerings that were selling unregistered securities would have to sell their already devaluated assets and pay investors the amount of US dollars that they invested earlier this year. Pompliano explains that several ICOs will have to declare bankruptcy.
Clearly, it is very important to have a regulatory framework that takes care of investors and allows the technology to spread. The SEC is doing an effort to implement already existing laws to Initial Coin Offerings and the assets that these projects are selling to the market.