The United States Securities and Exchange Commission (SEC) has been on the frontline in initial coin offering (ICO) oversight. The commission has strived to protect investors from the many scams that used ICOs to defraud investors. In the past, it has pursued some fraudulent projects, many of whom have ended up refunding their investors.
However, the regulator is slowly changing its tune. In its latest issue of guidelines for the industry, the SEC is friendlier and sounds more eager to inform than to threaten. This certainly hasn’t been the case in the past. In 2017 and 2018, most of what the SEC did was remind crypto investors about the dangers of investing in ICOs.
And certainly, many of the warnings were deserved and necessary. This was a time in which fraud was prevalent in the industry. Hundreds of investors lost millions of dollars in scams such as Centratech, Plexcoin and Bitconnect.
The ICO industry is slowly maturing, and the SEC is adjusting its perception accordingly. In the guidelines modified towards the end of last month, the regulator issued five easy-to-understand pointers for investors.
The first was that ICOs can be securities offerings. This serves to remind investors that some tokens may end up falling under the commission’s jurisdiction. While Securities Token Offerings have become increasingly popular, not every company is as transparent. Some end up selling securities to their clients in the name of ICOs.
ICOs may need to be registered is the second pointer. This further builds on ICOs sometimes qualifying as securities. The regulator further reminded investors that tokens can go by so many names. They can also be restructured to provide some sort of utility and called utility tokens. However, this doesn’t exempt them from being securities and falling under the SEC’s jurisdiction.
And as it has done severally in the past, the commission reminded investors of the risks that ICOs pose.
“While some ICOs may be attempts at honest investment opportunities, many may be frauds, separating you from your hard-earned money with promises of guaranteed returns and future fortunes. They may also present substantial risks for loss or manipulation.”
Ask before investing, the last guideline reminded investors.
While still sounding a warning against possible scams, the SEC is becoming more progressive by the day. This is a positive sign that it’s finally accepting that ICOs are the future of crowdfunding. It could also be the first step in formulating and implementing a regulatory framework for the industry.
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