Jay Clayton, the United States Securities and Exchange Commission Chair, released a public statement that intended to answer questions the masses might have on cryptocurrencies. Given digital currency’s current popularity and the promise of fortune, Clayton – on December 2017 – published the below information on the SEC website. Clayton’s goal for the statement he released was to provide his view on cryptocurrencies, the ICO markets, and the SEC’s stance on these. The below data is mainly addressed to investors and investment advisers, lawyers, accountants, broker dealers.
1 No cryptocurrency investments are registered with the SEC
Currently, there are zero initial coin offerings or ICOs that are SEC-registered. The SEC also clarifies that exchange-traded products (EFTs) which hold cryptocurrencies or any cryptocurrency-related assets are not approved for trading and listing. The Securities and Exchange Commission acknowledges the minimal protection available to cryptocurrency investments compared to stocks and conventional securities. This fact has made it easy for such investments to be price-manipulated or be subject to fraud. Clayton is therefore warning investors to be wary of any investments that claim to be SEC-registered. Always ask questions and ensure that you receive explicit answers prior to placing your hard-earned money in illicit investments.
2 A few ICOs can be considered as securities
According to the SEC, principles applicable to long-standing securities law allow tokens to be considered as an investment contract – a fact that would subject them as a security under the United States federal securities laws. Though some falsely believe that ICOs are not covered by securities laws since cryptocurrency is a commodity and not a security, ICOs’ structure actually resemble a public stock offering. The SEC declares that a cryptocurrency token can be considered “an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.” This statement requires ICO for sale to the public to be registered. SEC finds it disturbing that enterprises that create ICOs are not registering their offerings.
3 SEC is not against bitcoin
The SEC is not in any way against digital currencies or cryptocurrency investments. The regulatory body’s intent is to allow participants in the digital currency market to gain the necessary knowledge and understanding to assess their investments appropriately. The SEC is a firm believer that crypto enterprises can easily collaborate with regulators to avoid potential problems to occur in the future.
Clayton clarifies that the SEC encourages capital formation while also acknowledging the current technology used by the digital currency market is “disruptive (yet) transformative and efficiency enhancing”. He also encourages investors to be open to such opportunities yet also critical. He advises everyone to “ask good questions, demand clear answers, and apply good common sense” when making financial decision whether these are crypt-related or not.