U. S. Securities and Exchange Commission (SEC) Chairman Jay Clayton issued a public statement Monday regarding cryptomoney and initial coin offers (ICOs).
The statement serves as a warning to both Main Street investors and market professionals and concludes that most of the tokens sold at ICOs to date are probably under U. S. law.
Main Street Investors Warning: Asking questions, demanding answers
Clayton begins his statement with a general warning about cryptomoney and ICO markets aimed at Main Street investors, which includes basic advice for prospective investors, such as "ask questions and demand clear answers.
It also points to the particular risks of investing in crypto and ICO, especially the fact that invested funds are often transferred abroad. As Clayton cautions, this makes it more difficult for national regulators, such as the SEC, to protect investors from fraud and "bad actors.
*For market professionals: security is safety, no matter what you call it
The second section of Clayton's statement is intended for market professionals, including securities lawyers, accountants and consultants, and emphasizes their responsibility to protect investors. It encourages professionals to carefully consider each asset case, whether a token, currency or currency, to determine whether it is a guarantee in the US.
Clayton notes that the content of the transaction is more important than the form to determine whether an investment is a security. Regardless of the denomination of a token, currency or currency, each must be reviewed on a case-by-case basis to determine its status under U. S. securities laws. Assets that are determined as securities in the U. S. must be registered with the SEC to comply with U. S. laws or face consequences.
According to the SEC, an offer would be considered a security if it is "an investment of money in a joint venture with a reasonable expectation of profits derived from the entrepreneurial or managerial efforts of others.
In Clayton's opinion, most of the tokens offered at ICO to date are included in this definition, whether or not they have "utility" functions as well:
"In general, the initial currency bidding structures I have seen promoted involve the offering and sale of securities and directly involve the securities registration requirements and other investor protection provisions of our federal securities laws. In general, these laws state that investors deserve to know what they are investing in and the relevant risks involved.
Despite this fact, so far no ICOs have been registered with the SEC, as Clayton points out.
Conclusion: ICOs could be a good thing, but they should be regulated
It is worth noting that Clayton begins his speech to market professionals with a positive statement about ICO, saying:
"I believe that initial currency offerings, whether or not they represent securities offerings, can be effective ways for entrepreneurs and others to raise funds, even for innovative projects.
However, it then details the particular risks of investing in ICOs. As investment in both ICO and cryptomoney continues to proliferate, the SEC will remain committed to enforcing U. S. security laws. On the issue of implementation, Clayton said:
"I have asked the SEC Law Enforcement Division to continue to vigorously monitor this area and recommend coercive measures against those who make initial offers of coins in violation of federal securities laws.
