‘ICOs Can Be Effective When They Follow Security Laws’: US SEC Chairman

The United States Securities and Exchange Commission (SEC) Chairman Jay Clayton said that Initial Coin Offerings (ICOs) have the potential to be effective, but that “securities laws must be followed.”  Clayton spoke in detail about the matter during a speech about the SEC’s activities this year at the BLANK.

He said that the Commission and its staff have devoted “a significant amount of time” this year to Distributed Ledger Technology (DLT), digital assets and ICOs. Clayton said that he expected this trend to continue well into 2019.

Clayton underlined that there are “a number of concerns” relative to ICOs. More precisely, he pointed out the fact that, according to him, ICOs are currently operating in a way that grants substantially less investor protection than that of traditional equities and fixed income markets. In other words, this leaves greater vulnerabilities in the system and increases the risk of fraud and manipulation.

In the past, Clayton has noted that ICOs should be considered as securities.

In more recent times, he has taken a more optimistic stance, but still maintains that ICOs should strictly follow regulations. In a recent speech, he said,

“I believe that ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed.”

At this point, the chairman switched focus to the recent creation of the Strategic Hub for Innovation and Financial Technology (FinHub). The SEC launched FinHub primarily to maintain a strong presence in the financial technology space.

As of now, FinHub’s primary role is to help new ICOs remain in compliance with existing laws and regulations in place by communicating with them. Expressing the Commission’s acceptance of new technologies and products, he said that the creation of the FinHub and other SEC activities demonstrate that their “door remains open to those who seek to innovate and raise capital in accordance with the law.”

Putting its words into the action, the SEC fined digital asset fund CoinAplha Advisors a sum of $50,000 and issued a cease-and-desist order to the company. In response, the company immediately stopped its activities and took actions as per the Commission’s instructions.