SEC Cracks Down on Publicly Traded Companies Capitalizing on Blockchain Hype

Over the past few months, we have seen the SEC get a lot more active when it comes to unusual behavior in the world of cryptocurrency. Not only are they going after scam projects, but also ICOs which may violate securities laws. It now seems the government agency will also focus on companies which suddenly add the word “blockchain” to their names. Ventures with no meaningful track records will be especially scrutinized in the coming months.

Adding Blockchain to Company Names is Worrisome

If there is one particular trend that stands out the most, it has to be blockchain. This technology has been hyped for quite some time now, even though there are very few actual implementations of this technology in the real world. Moreover, we have seen a fair few ICO projects focus on blockchain-based solutions as well, even though the majority of these concepts don’t need such infrastructure whatsoever. This trend is rather worrisome in its own regard, but it’s not what the SEC is worried the most about right now.

There have been several media headlines involving companies suddenly adding the term “blockchain” to their names. In most cases, such decisions have boosted companies’ stock prices, even when there was never any intention of getting involved with the technology. The “Long Island Iced Tea Blockchain fiasco is perhaps the best example of how developments like these will only create confusion first and foremost.

As a result, the SEC will start to crack down on companies without meaningful track records that add the term “blockchain” to their names. Without any evidence of working on the technology, there’s no reason why any company should use this term for promotional purposes. In a way, it can be considered stock market price manipulation, which is a major offense in the United States as well as other countries.

The SEC wants to ensure that only companies dabbling in blockchain activities can make use of this term for marketing and promotion. Changing a company name to include “blockchain” for no good reason needs to be punished. Moreover, any company issuing securities related to blockchain without issuing a disclosure to existing investors will face a lot of scrutiny as well. It’s good to see the SEC acknowledge this new “bubble” waiting to explode in a violent manner.

Right now, the SEC is keeping a very close eye on public companies shifting their business models to incorporate blockchain. Especially those who do so to capitalize on the perceived promise of distributed ledger technology will open up a can of worms. It makes zero sense for a beverage company to get involved with blockchain without any working code or previous intent to do so. Such actions need to be nipped in the bud; that much is rather evident.

It remains a bit unclear what the potential repercussions for such changes will be, though. Freezing the trading of company stocks is a logical course of action, although it may not be sufficient to dissuade other players from taking a similar approach in the future. It seems likely that a fair few companies will violate securities laws by taking this course of action, which could lead to a lot of legal trouble in the long run. With the help of the SEC, ridiculous trends like this one will be weeded out pretty quickly.