This week, the US regulator, the Securities and Exchange Commission (SEC), announced in a report that the organization was conducting investigations into the current state of Initial Coin Offerings (ICO) and the DAO debacle last year. From a letter perspective, the days of all these token sales and the ICO period of the “Wild West” are likely to be coming to an end.
Also read: ICO hype attracts investors, but also skeptics and regulators around the world
“The market was expecting this announcement”
Bitcoin.com recently reported on the SEC announcement of July 25th, which detailed the opinions of the agency on last year’s DAO crowdfund based on Ethereum and the current ICO hype that is currently taking place. The report contained some key statements that stated that U.S. securities laws would apply to ICOs and the sale of digital tokens. Given the ICO excitement over the past six months, which has raised millions of dollars in crowdsales based on the Ethereum protocol, some within the cryptocurrency community seemed to welcome the SEC news. Many proponents of cryptocurrency and blockchain believe the ICO market is out of control while others believe regulators need to step aside.
This week, some members of the bitcoin and blockchain community reached out to Bitcoin.com for a statement on the SEC’s latest announcement. Ari Meilich, project manager at Decentraland, a blockchain-based virtual world, said the market is awaiting statements from the SEC.
“The SEC weighed in stands for the public acceptance of blockchain instruments,” explains Meilich. “They said that the DAO tokens are a security and that all securities must be registered by law. The market expected this, and the price of non-security tokens like Ethereum did not fluctuate when the SEC report came out. “
Any company that fails to comply with US securities laws will be held accountable
Steven Nerayoff, an early Ethereum advisor and attorney who invented the name “gas” for the digital currency, said the industry already knew this regulatory proclamation was coming.
“The SEC’s decision confirms what the blockchain industry already knew: Federal securities laws apply to all new types of technology,” Nerayoff told Bitcoin.com.
If something owns securities that are sold, one must comply with US securities laws. This is the case with all technologies. And any organization that fails to comply with the requirements of US securities laws should be expected to be held accountable.
“Significant consequences for companies that have carried out ICOs”
The largest Bitcoin ATM network, Coinsource General Counsel Arnold Spencer believes that what the SEC has said cannot be said enough and it is clear to him that the regulator will soon enforce these guidelines.
“It is now clear that some digital currencies are considered securities depending on how the tokens or coins are structured,” explains Spencer. Second, and more importantly, it is now clear that regulators and law enforcement agencies in the United States will enforce these laws. The pipeline for ICO has just gotten much smaller. ”
I forecast some significant ramifications for the companies that have conducted ICOs that are structured similarly to the DAO in the past six months. There are many ICOs that are now definitely considered securities and yet are not registered.
The crowdfunding phase of the ‘Wild West’ could be coming to an end
Perry Woodin, CEO of Node40, a blockchain accounting and masternode hosting service, wasn’t surprised by the SEC’s report on DAO and token sales either. “The number of companies supporting blockchain applications has exploded in recent years and with them we’ve seen new tools for raising capital,” Woodin told Bitcoin.com.
“The SEC’s report on ICOs came as no surprise,” added the Node40 founder. “Many of the ICOs targeted this compliance gray area. They wanted their offers to be considered “crowdfunding” even though they could not meet the requirements of the crowdfunding exemption. Now we’ll see what happens when companies try to adhere to SEC guidelines. “
The SEC’s announcement of ICO investments and their recent investigation into the DAO project suggest that regulators have found many red flags related to the DAO crowdfund, but have chosen to drop this particular project. However, it appears that the last six months of “Wild West” ICOs and token sales are subject to these securities laws and many projects could be left by the wayside for failing to meet SEC requirements.
What do you think of the SEC’s latest announcement? Do you agree with industry representatives that this was to be expected? Let us know in the comments below.
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Blockchain, Coinsource, Crowdfunding, Cryptocurrencies, DAO, Decentraland, Digital Assets, Ethereum, Gas, ICOs, N-Featured, Node40, Perry Woodin, SEC, securities laws, token sales