In the last few months, ICOs have been able to raise billions of dollars from investors, and the SEC has taken note. They have begun to issue subpoenas to these companies, asking for items such as emails, marketing materials, and many other details surrounding the ICOs. Advisors of these companies that issue ICOs have also been subpoenaed.
A recent report indicates that the probe on ICOs has intensified. The main underlying cause of this is that the SEC wants to reign in the industry. The main issues they have are not with the trade of crypto itself, but how ICOs are being organized. They are also uncomfortable with some of the project concepts being used to raise funds.
The report indicates that the SEC would like to understand the structure of sales and pre-sales of ICOs. The problem is that although the ICOs operate in much the same ways as IPOs, there is no rigorous regulation in the same way that there is with IPOs. In the past, blockchain companies have been warned for what regulators have termed as “widespread violations of securities rules designed to protect investors.”
According to Jay Clayton, the Chairman of the the SEC, most people who promote ICOs and crypto are not complying with the regulations. The chairman told his staff members that they should be on high alert for ICOs that operate contrary to the spirit of these laws.
A token report shows that the ICO market has already managed to acquire over $1.6 billion this year. A former SEC commissioner said that this was just a tip of the iceberg. He said more action would be taken to reign in the ICO market. According to him, these token offerings are “The Wolf of Wall Street’ on steroids.”
The SEC Is Steering Clear of Digital Currency
Reports elsewhere have claimed that the SEC aims to crack down on digital currencies. However, this is not true. It is only aiming to prevent fraud from unregulated ICO activity. In most cases, these ICOs have been found to have no physical product or platform. They usually just sell a concept and convince funders to help them bring it to life. An upcoming report by MIT shows that about $270-$317 million raised in ICOs has been on the back of scams.
Of these many scams, the regulators have only been able to resolve a few of them. They have struggled to keep up with the burgeoning sector that has grown in just months. The recent subpoenas have focused on SAFTs or Simple Agreements for Future Tokens. They are the method most commonly used by ICOs. With increased regulation, it will help keep out bad actors and make investing in ICOs much safer.
Is the increased regulation of the ICO sector a good thing? Leave us your thoughts in the comments below.