News SEC Issues Warning for ICO Issuers and Investors

SEC Issues Warning for ICO Issuers and Investors

-

- Advertisment -

Ashour Iesho · July 26, 2017 · 2:00 pm

The SEC has officially published a report wherein it describes the potential risks of Initial Coin Offerings (ICO) and Decentralized Autonomous Organizations (DAO).


The DAO Report

SEC's DAO report

The U.S. Securities and Exchange Commission published a report on July 24, that details its investigation into the DAO project. The DAO (Decentralized Autonomous Organization) was founded by the German startup Slock.it UG. On June 16, 2016, the DAO project was hacked and the attackers were able to steal 3.53 million ether, roughly worth $50 million USD at that time.

In the report, the SEC has decided that for the moment, the DAO project and its founders will not face any charges for violating U.S. securities laws. The Securities and Exchange Commission has concluded, however, that “DAO Tokens” are subject to the requirements of the U.S. federal securities laws.

According to the commission, tokens that promise to give investors a return should be regulated as securities and thus be registered with the SEC. The SEC has also stressed that investing in these “DAO tokens” might be very risky and unsafe for consumers and investors.

ICO Decision

Despite recent headlines proclaiming the SEC’s report to be the end of U.S. participation in ICOs, it is important to understand that not all ICOs would necessarily be subject to federal securities laws.

According to the SEC:

U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organizations.

The important thing to pay attention to in that statement is the word “may”. While ICOs that are offering investments would need to register with the SEC, there are circumstances where exemptions could apply. If a token were considered to be a utility instead of an investment, for example, then the issuing ICO might not have to register with the SEC.

Not surprisingly, and in typical government fashion, the SEC has yet to release any detailed information on what would or would not be considered a security.

The Commission has also published an investor bulletin that describes the current status of ICO or Initial Coin Offerings. In the bulletin, the SEC is advising investors and consumers to be very careful in which ICOs they decide to invest their money. They point out that participants should properly review an ICO for potential fraud or mismanagement of funds.

Opening the US Market

Opening the US Market

Up to this point, many ICOs have been self-regulating by preventing U.S. investors from participating in the funding rounds. This recent announcement by the Commission might allow future startups to open up their ICOs for U.S. citizens and investors, without having to register with the SEC.

Carol Van Cleef, a Fintech lawyer with the law firm of Baker & Hostetler LLC, offered her opinion on the report:

The SEC’s announcement today is not a surprise and definitely does not mark the end of the road for tokenizations.  In fact, it should have a very positive effect on the token market. It removes a much uncertainty in the market and clarifies that the SEC will not consider all tokens to be securities. It is very consistent with the advice we have been providing to clients.

To businesses who might be considering “tokenization” she added:

For those who are looking at issuing a token solely to raise money for a business venture – the SEC has made clear that the offering must comply with federal securities laws. For those that have never intended it for these purposes, they can feel more comfortable with a clear roadmap – something a good securities lawyer could or should have already laid out.

What are your thoughts on the SEC’s report? Do you think that this will open the U.S. market for ICOs? Let us know what you think in the comments below!


Images are courtesy of Pexels, Know Your Meme, Jonathan Ernst/Reuters

DAO tokensICOsSECSecurities and Exchange Commission



Show comments

Source link

SEC Issues Warning for ICO Issuers and Investors
Bitnewsbot.comhttps://bitnewsbot.com
BitNewsBot.com aggregates the latest news around bitcoin, blockchain, cryptocoin, ICO's and FinTech, from all around the internet and publishes them in a single place.

Latest news

“Chinachain” aims to connect hundreds of cities across China. Will it work?

If there’s ever a “Chinachain” for business, sanctified and supported by the state, the BSN ( Blockchain...

Top 10 BEST Crypto Trading Books for New Traders (2020)

We may receive a small revenue share if you purchase something from this guide - with...

Crypto Firm That Connects Exchanges and Banks Receives $5m Investment From Wells Fargo

Cryptocurrency startup Elliptic recently held a Series B funding round which was joined by a venture arm...

Will New Zealand’s crypto salary project work?

Now in 2020, Bitcoin, and in a broader sense cryptocurrencies in general, have gone through hundreds of...
- Advertisement -

Is Tron’s decentralized app market really a “Las Vegas on the blockchain?”

The original idea behind creating cryptocurrencies was to offer a much more decentralized and convenient payment platform...

Why Blockd’s anti-hacking tool is vitally important for crypto

“Blockd.” That’s the message that appears if a hacker tries to steal funds out of an account...

Must read

“Chinachain” aims to connect hundreds of cities across China. Will it work?

If there’s ever a “Chinachain” for business,...
- Advertisement -SEC Issues Warning for ICO Issuers and InvestorsSEC Issues Warning for ICO Issuers and Investors

You might also likeRELATED
Recommended to you