Since the Bitcoin fervor of last December, SEC Chairman, Jay Clayton, has been declaring that token sales are securities and should be regulated similarly to stocks on public exchanges. Today, the SEC Chairman confirmed his classification of ICOs as securities in an interview with CNBC.
The Days of the Wild West Are Over
According to WSJ, the total amount invested in ICOs has risen from $6.6 billion in 2017 to $7.15 billion USD in 2018 so far. Companies like Block.one, the developer behind EOS network, have just recently raised a record-breaking $4 billion USD from its year-long ICO – a number far exceeding most traditional IPOs.
The market for selling innovative ideas built on the blockchain has exploded with worldwide media and investor attention, causing regulators from around the world to take action.
With China already banning ICOs, it has become clear that the regulatory perspective on token sales is not favorable in their current state.
The U.S. is just now beginning to establish a regulatory framework that may classify ICOs as securities, opening the floodgates as to what will happen to coins already listed on exchanges and how future coins will get listed.
SEC Chairman Provides Clarification
In an interview with CNBC, SEC Chairman, Jay Clayton made his perspective on cryptocurrencies and ICOs clear, including how they should be distinguished and how each should be regulated.
In the interview, Clayton described cryptocurrencies as potential “replacements for sovereign currencies” and did not recognize them as securities:
“Replace the dollar, the yen, the euro with Bitcoin. That type of currency is not a security.”
However, tokens exchanged in the crowdsale process known as an initial coin offering would have a more stringent classification. Clayton proceeded to express his definition of digital assets as securities:
“Where I give you my money and you go off and make a venture… and in return for me giving you my money, you say, ‘You know what, I’m going to give you a return.’ That is a security, and we regulate that. We regulate the offering of that security, and we regulate the trading of that security.”
Given his stance on ICOs, Clayton believes that digital asset crowdfunding should be regulated as equivalent to normal stock exchange listings:
“If you have an ICO or a stock, and you want to sell it in a private placement, follow the private placement rules.”
With the new digital asset class still ambiguous, some are left wondering whether regulators should adapt and change standards rather than the other way around. Clayton denounced this argument by stating:
“We are not going to do any violence to the traditional definition of a security that has worked for a long time… We’ve been doing this a long time, there’s no need to change the definition.”
As the interview came to a close, CNBC reporter Bob Pisani asked Clayton to confirm his classification of ICOs as securities, to which Clayton replied: “Bob, I just did.”
Cover Photo by Bernard Hermant on Unsplash