The main regulator in Wall Street announced that the agency intends to set a legal ground for the digital coin. To its views, the initial coin offerings or ICOs should respond to the same guidelines as traditional securities sales do. ICOs are a novel strategy through which tech companies can organize crowdfunding efforts.
The Securities and Exchange Commission Views the Digital Coin as Nothing but Securities
ICOs have become the new Holy Grail for successful financiers. Many deal-makers decided to leave their stiff yet profitable careers in exchange for the volatile playground of ICOs. By trading digital tokens, they are in for quick and large funds. However, this new occupation is swimming in murky, uncertain waters that are currently outside the law. There’s no regulatory oversight to take in its control the way professionals create and sell the digital coin.
Therefore, the Securities and Exchange Commission showed intentions of regulating these activities. The agency started from the consideration that such digital tokens are nothing but securities. As a consequence, these assets need to be registered. Only a valid exemption could revoke such a responsibility.
“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors.”
Critics Consider ICOs as just an Unsteady Financial Practice Based on Imagination
Critics against such cryptocurrencies labeled these financial activities as just the products of imagination. ICOs are a mixture between crowdfunding and initial public offerings which transcended into the online world.
However, instead of receiving shares in the company they invest, a startup’s ICO issues virtual tokens which are small ramifications of cryptocurrencies. The more successful the startup gets, the more valuable such tokens become.
So far this year, there were 89 coin sales that raised around $1.1 billion for tech companies. However, all this trading happened without any insurance for investor protection as SEC fears. By the end of the year, there are also announced additional 110 ICOs.
SEC is currently investigating a virtual organization named The DAO created last year. The company behind this activity is a blockchain firm called Slock.it. The federal agency intends to use the findings in this investigation as a cautionary case for the digital coin market.
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