SEC Releases ICO Guidelines; Too Little, Too Late for Cryptocurrency Investors?

The U.S Securities and Exchange Commission has released a guide for would-be cryptocurrency creators and investors; but a over a year on from the heady peak of the ICO craze, is it too little, too late?

SEC Offers ICO Guide

The SEC’s newly released guide to initial coin offerings features five main points, many of which will already be familiar to anyone keeping up with the SEC saga.

  • ICOs Can Be Securities Offerings

This one is hardly a surprise, however, it may be the first time that it has been stated officially by the SEC. Up until now all we had to go by were the ‘unofficial’ utterings of SEC figures at various talks and conferences.

“ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws.”

  • They May Need to Be Registered

ICOs that are securities most likely need to be registered with the SEC or fall under an exemption to registration.”

Another somewhat obvious statement, however, the vague wording present here suggests the SEC might not be completely sure on what qualifies as a security and what doesn’t.

  • Tokens Sold in ICOs Can Be Called Many Things

This is one aimed specifically at the ‘utility’ tokens out there, such as the recently reviewed Bitcoiin (B2G). When the New Jersey Securities Bureau slapped a cease and desist order on the B2G team, they responded by claiming they had no obligation to the Bureau due to the B2G token being a utility token, and not a security.

“ICOs, or more specifically tokens, can be called a variety of names, but merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.”

  • ICOs May Pose Substantial Risks

“While some ICOs may be attempts at honest investment opportunities, many may be frauds, separating you from your hard-earned money with promises of guaranteed returns and future fortunes. They may also present substantial risks for loss or manipulation, including through hacking, with little recourse for victims after-the-fact.”

  • Ask Questions Before Investing

The final point suggested by the SEC perhaps shows just how nebulous the entire space is right now. If 20% of the SEC’s big ICO guide is dedicated to ‘ask questions’, then maybe they don’t actually have much to say on the matter to begin with.

“If you choose to invest in these products, please ask questions and demand clear answers.”

Too Little, Too Late?

The difference between the cryptocurrency space this year compared to last year is night and day. In January of 2018 over $1.5 billion was raised via ICOs within the space of thirty days.

Fast forward to 2019, and that number stands at $30 million – a 98% drop off in twelve months. As is often the case with regulators, the SEC appears to be closing the stable door after the horse has bolted. That said, the process of reigning those horses back in (by ordering mass refunds, for example) could yet prove to be a messy one.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Greg Thomson is a freelance writer who contributes to leading cryptocurrency and blockchain publications like CCN, Hacked, and others.