US Regulators Issue New Cryptocurrency and ICO Warning

As more and more governments are moving to regulate cryptocurrencies, US regulators have started to warn investors from cryptocurrencies and ICOs. 

Is the Bubble Ready to Burst?

The cryptocurrency market had a phenomenal bull run this year. As the cryptocurrency industry is constantly improving and innovating, many finance experts believe that the hype behind it is just speculation. Experts believe that the global cryptocurrency market may be in a bubble state, and it might burst any moment. But many cryptocurrency experts are still optimistic and believe that Bitcoin and other cryptocurrencies are still undervalued. The Winklevoss twins recently stated that Bitcoin is still to undervalued. Global regulators have started warning investors from cryptocurrencies and potential fraudulent ICOs.

SEC Warns Cryptocurrency Investors

The US Security and Exchange Commision (SEC) has issued a new statement regarding its stance on cryptocurrencies and token sales. The SEC’s public announcement mainly focused on cryptocurrencies and initial coin offerings. The announcement strongly advises investors to be more careful with their cryptocurrency investments, as the market is still unregulated and doesn’t offer the same securities as traditional investment markets offer. The report also noted that entrepreneurs that plan to host an ICO should implement the proper securities regulations by the SEC.  SEC Chairman, Jay Clayton, stated following in the report:

Investors should understand that to date no initial coin offerings have been registered with the SEC.  The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies.[2]  If any person today tells you otherwise, be especially wary.

He also added:

I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects.  However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.  A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, our securities laws must be followed.[4]  Said another way, replacing a traditional corporate interest recorded in a central ledger with an enterprise interest recorded through a blockchain entry on a distributed ledger may change the form of the transaction, but it does not change the substance.

The SEC’s mains concerns are centered around fraudulent ICOs and token sales that promise unrealistic profits for investors. Recently, the special SEC cyber team managed to shut down a fraudulent token sale before it could start collecting money from unsuspecting investors.

What are your thoughts on SEC’s new announcement? Do you think that new regulations would benefit the cryptocurrency space? Let us know in the comments below!

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