SEC Regulates “Initial Coin Offerings” Virtual Tokens Subject To Securities Laws
By Aaron Kesel
The Securities and Exchange Commission (SEC) has issued a press release cautioning market participants that offer “Initial Coin Offerings” or “Token Sales” that these “virtual” organizations are subject to the requirements of federal securities laws. So what does this mean for Bitcoin and other altcoins that were primarily operated inside U.S. jurisdiction?
“The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws,” the report said.
The inquiry was due to the SEC’s Enforcement Division launched to determine whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for the “Ether,” virtual coin.
Call this what it is: A bunch of strangers in a far off land threatening peaceful people all over the world with violence if they don’t obey https://t.co/WQxsAe4e67
— Roger Ver (@rogerkver) July 26, 2017
So what does this mean for you the investor into these altcoins?
Firstly, it means your personal right to participate in free markets of ICOs was just shat on. Secondly, it conveys that several dozen blockchain projects that raise capital through the blockchain will probably move out of the USA because of the SEC ruling on compliance with federal securities effectively outsourcing cryptocurrency jobs overseas.
How many blockchain projects will move out of the USA because of the SEC? Citizen’s right to participate in free markets also shit on.
— Counter Markets (@CounterMarkets) July 25, 2017
Lastly, if you now surpass over $1 billion in net worth, you will have to register the tokens as securities; if you don’t you “may be liable for violations of the securities laws. The purpose of the registration “is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection.”
Zerohedge reported that the SEC’s decision to “register” ICOs may have a similar effect to when the SEC denied to allow a Bitcoin ETF, which they note “initially sent the price of bitcoin tumbling but then promptly reversed, and pushed it back to all time highs.”
While there is a negative connotation to the SEC’s decision, Zerohedge further expresses that it may be a “blessing in disguise” which will allow for the “entrance of major banks to use it as an alternative to IPOs.” That could potentially “curb the proliferation of ponzi, pyramid and other get rich quick schemes which in many cases are beyond borderline criminal.”
All in all this will make investing harder and push some investors away from using the USA as a haven for their projects but may be a brighter future in the long run by forcing the more serious and credible coin offerings into the open and ousting others which will leave just a handful of cryptocurrencies that are actually worth something. This likely will ultimately end up benefiting the blockchain which has been flooded with ideas for cryptocurrencies rather than working on the other established technologies. Additionally, regulation will lead to a sturdier blockchain ecosystem by limiting both losses and gains.
It will also begin to centralize cryptocurrencies under one umbrella of enforcement; which, whether you like it or not, will allow for future use of cryptos as eligible collateral within capital markets’ transactions, something Bank of America said in a subsequent report is “critical to truly unleash the crypto community to its next evolutionary step in replacing fiat.”
Wall St. tested the use of digital currency in a secret meeting during the middle of 2016 in April, so we are almost towards that “evolutionary step in replacing fiat” with a few more hurdles to face before we see cryptocurrency used globally.