Most cryptocurrency enthusiasts are well aware that the SEC is cracking down on initial coin offerings. This is not entirely surprising, as the industry raises a lot of questions regarding the legitimacy of creating value out of thin air. The SEC’s website has recently been updated with a page dedicated to initial coin offerings, which is pretty interesting.
The ICO Section on SEC.gov
It was only a matter of time until the SEC dedicated a portion of its website to initial coin offerings. With dozens of investigations being launched against companies trying to raise money in unique ways, it is only normal that the agency wants to protect consumers in many ways. Judging from the SEC’s website, it is evident the agency wants to educate the masses on the potential risks posed by ICO projects.
More specifically, the agency believes there are some things which consumers need to be aware of at all times, which is an important first step toward further legitimizing this industry as a whole. Explaining that ICO tokens can be securities offerings and detailing the risks that they bring to the table is a big step in the right direction. It is also a stark warning to companies exploring the ICO model that they will need to file with the SEC to avoid any confusion.
Additionally, the SEC explains how ICOs themselves pose significant risks which investors will need to take into account at all times. It is evident that investing in an initial coin offering is an appealing proposition, even though nearly half of all ICO tokens are now trading below their initial offering prices. That in itself is another major worrisome development which shows investing in an ICO should only be done for the long haul, rather than for short-term profits.
Furthermore, the SEC’s website touches upon some interesting issues regarding cryptocurrencies and ICOs. There are a lot of factors which one needs to take into account, including the fact that many products are sold on markets that span national borders, and that one should do their own research first and foremost. If more people researched ICOs prior to investing, a lot of issues could be prevented. Unfortunately, people are not too keen on doing their research and simply see the potential to make a quick buck.
It is good to see that the SEC has not only dedicated this section of its website to investors. Instead, it also makes it clear to companies pursuing this business model that they will need to be very careful when promoting coins and offerings moving forward. Moreover, the SEC expects these companies to protect investors at all times, although it is unclear how the agency expects ICO providers to do that.
Whether or not all of this will lead to even more ICO probes in the future remains to be determined. There are many initial coin offerings out there which may or may not qualify as securities, and a harsh course of action is more than warranted as of right now. Initial coin offerings are a great business model, but only if companies and investors take the necessary precautions to ensure everything is perfectly legitimate.