Securities and Exchange Commission to crack down on shady cryptocurrency ICOs
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The cryptocurrency market is famous for its current freedom from centralized regulation. However, this has led to a number of unscrupulous business models – for example, in the case of BitConnect which offered its own virtual currency to customers who could convince others to sign up to the platform (akin to a Ponzi scheme). ICOs in 2017 raised over US$6 billion and that figure is likely to be eclipsed in 2018. The Wall Street Journal has reported that the SEC has now stepped in and issued subpoenas to a large number of technology firms with the hope of weeding out some of the gunslingers that occupy the cryptocurrency Wild West.
There is some concern that there could be rule violation and illegal trading going on within cryptocurrency presales and ICOs. SEC Chairman Jay Clayton had this to say on the matter in an open letter published in December 2017:
Selling securities generally requires a license, and experience shows that excessive touting in thinly traded and volatile markets can be an indicator of 'scalping,' 'pump and dump' and other manipulations and frauds. Similarly, I also caution those who operate systems and platforms that effect or facilitate transactions in these products that they may be operating unregistered exchanges or broker-dealers that are in violation of the Securities Exchange Act of 1934.
Like it or not, some amount of cryptocurrency regulation in the near future seems to be inevitable at this point.
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