Just a couple of days ago I blogged about the risks of ‘fund raising ICO’s carried out by companies as an alternative way of raising capital, if you haven’t read it you can find it here. I argued that the process lacked any regulatory or legal oversight and therefore legal protections for would be investors. Also the growth in these schemes was reminiscent of market conditions which lead to the .com bubble in the late 90’s and early 00’s.
“Issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies.”
I speculated that authorities would step in, it just depended on the timing. Well it seems that the time is now. The SEC has announced that they will be seeking to regulate ICO’s as a security, so companies wishing to fund their operations through this process will have to submit the necessary regulatory filings with the SEC to proceed.
This decision seems to come off the back of the issues that I have outlined before, as well as recent ICO’s which have been hacked resulting in investors losing some serious cash.
A positive move for the industry
I think regulators around the world have taken a wait and see approach on crypto currency in relation to business processes. As a result, investing in crypto coins has up until now been considered to be a gray area. This has led to companies hijacking the perfectly legitimate ICO process for their own commercial needs.
With the SEC now appearing to nail its colours to the mast this can only be a positive move for the crypto industry, as investors will be sure that any new coins to be offered via an ICO meet a certain standard, thus limiting risk and uncertainty.
Now that coins will be considered to have the SEC badge of approval, it could lead to institutional investors entering the markets. This could result in increased liquidity, lower volatility and more stable coins. With a strong and stable base, the aspiration of crypto being widely used by businesses and consumers is a step closer to being reached.
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