The past week has been significant for the cryptocurrency space, particularly with regard to ICOs, tokens, and crypto exchanges. The U.S. Securities and Exchange Commission (SEC) has once again reaffirmed its position that tokens issued in ICOs are considered securities. As a result, token issuers—whether individuals or entities running an ICO—must comply with applicable securities regulations (for more on this, check out this insightful article on CoinDesk).
The SEC has reportedly issued a large number of subpoenas to ICO issuers and advisors involved in token transactions that may not have adhered to federal securities laws. It is anticipated that the SEC will continue to take a firm stance against fraudulent ICOs and their promoters.
In addition, the SEC has made it clear that cryptocurrency exchanges must register if they facilitate the trading or handling of tokens and coins that are classified as securities.
The SEC’s campaign against illegitimate ICOs, their promoters, and crypto exchanges is driven by the need to protect investors. Some experts within the industry estimate that over 10% of the funds raised in ICOs may have been misappropriated. Additionally, many believe that the vast majority of ICO projects, companies, and promoters will ultimately fail, leading to significant losses for investors. As of March 2018, more than USD 6.5 billion had been raised through ICOs—funds that are now at risk.
We anticipate that other global regulators, such as the UK’s FCA and Germany’s BaFin, will follow the SEC’s lead and take strong action against illegitimate ICOs, working to clean up the market and protect investors.