Not All ICOs are Bad, But Regulation Is Necessary Says SEC Chairman

The United States Securities and Exchange Commission (SEC) is not hostile to digital currencies or ICOs and the regulatory measures the agency seems keen on implementing are only for the greater good of the crypto economy. That’s the vibe the SEC Chairman Jay Clayton extrapolated as he took the stage at a Princeton University event on April 5, 2018.

Clayton made it abundantly clear that the agency firmly believed an oversight will further strengthen the crypto industry rather than restricting to its growth potentials.

Legit ICOs exist

The SEC Chairman went a step further by dismissing the notion that all ICOs are fraudulent. When asked if the agency’s recent action against FinTech startup Centra Tech implied a deep-rooted distrust of ICOs within the SEC, Clayton’s response was “absolutely not.”

It is worth mentioning here that on April 2, the SEC released a press release alleging that thousands of investors were duped in an ICO by Sohrab “Sam” Sharma and Robert Farkas, co-founders of Centra Tech. According to the charges against Centra Tech, the firm had lured investors into its ICO by exaggerating its association with the corporate world. Sharma and Farkas allegedly claimed to have tie-ups with Visa, MasterCard, and Bancorp while there was none. They were also the first people to have been arrested because of a coin offering.

During his speech at Princeton University, Clayton highlighted that the SEC wanted the crypto industry to mature and all its recent actions were geared toward ensuring that it happens sooner than later.

He stretched that the SEC’s crackdown on fraudulent ICOs bears no negative impact on distributed ledger technology in other areas.He also implied that the way some fraudulent ICOs are exploiting the technology, the government is virtually left with no other choice but to intervene.

“I think if we don’t stop the fraudsters, there is a serious risk [of a] regulatory pendulum — the regulatory actions will be so severe that they will restrict the capacity of this new security,” Clayton told the attendees of the talk on “Cryptocurrency and Initial Coin Offerings.”

Securities or utility token?

If you remember, earlier in February, Jay Clayton testified before a Senate committee hearing on cryptocurrencies where he explicitly stated that every ICO he had come across appeared to be securities rather than tokens.

“I believe every ICO I’ve seen is a security… You can call it a coin but if it functions as a security, it is a security…,” Clayton said. “Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision.”

At Princeton, the SEC chairman reiterated his view that most so-called “utility tokens” are actually securities in disguise. Whenever a coin issuer is “offering something that depends on the efforts of others, it should be regulated as a security,” he said.

However, he clarified that thing might soon change as the industry evolves. The tokens that actually qualify as could fundamentally change to stay in tune with the fast-changing industry.

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