One of the main concerns in today’s crypto world is the lack of regulatory consensus. In fact, many investors have decided to cash out after government clampdown on crypto activities. However, it is quite clear that institutional investors are also waiting for regulatory clarity before they pour capital into the industry. Many are anticipating to what regulatory changes are going to be made in order to cater to the crypto market.
The head of the Securities and Exchange Commission, however, made it clear that there will be no adjustments to the rules just to digital currencies. This pertains to the discussion whether or not it should be considered a security.
According to Jay Clayton who works as the Chairman of the US Securities and Exchange Commission, “We are not going to do any violence to the traditional definition of a security that has worked for a long time”. He also added that “We’ve been doing this a long time, there’s no need to change the definition”.
According to Clayton, the securities market in the US is at $19 billion and he even considers this structure responsible for this as “the envy of the world”.
No Changes for ICOs
The rules are not going to be adjusted for the ICOs. In fact, just this year alone, ICOs were able to generate around $9 billion. For Jay Clayton, “if you have an ICO or a stock, and you want to sell it in a private placement, follow the private placement rules”. He also added that “if you want to do an IPO with a token, come see us”.
As for helping ICOs, SEC is “happy to help you do that public offering” as long as the issuer is going to follow the SEC rules.
Crypto on SEC Jurisdiction
Clayton also addressed the debates regarding cryptos falling under the watchful eye of the SEC. He said that “Cryptocurrencies: These are replacements for sovereign currencies, replace the dollar, the euro, the yen with Bitcoin”. And because of this function, he clarified that cryptocurrencies are not a security. However, by definition, he considers ICO as a security.
According to Clayton, “A token, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you money I say ‘you can get a return’ that is a security and we regulate that”. He also added that “We regulate the offering of that security and regulate the trading of that security”.
The Howey Test has been used in order to know whether or not a particular asset can be considered a security or not. In March, he clarified that ICOs are considered securities. Unfortunately, there are so many issues surrounding ICOs. According to a study, 20% of ICOs are actually a scam.
A balance between consumer protection and innovation can be challenging today. Take the case of EOS, for instance. With hype, even without an actual product, the ICO was able to raise $4 billion. In addition to this, there were several issues with their code. These instances are quite common today when it comes to ICOs.