Summary: The cryptocurrency space had an eventful July. Not only did the Bitcoin network prepare for the Bitcoin Cash hard fork, but the SEC also released a scathing report on ICO token sales. Given the uncertainty that lies ahead for ICOs, legal experts and compliancy firms are quickly gearing up to protect both investors and creators of ICOs. Cointelegraph keeps you up to date with the latest and most important regulatory news in digital currencies.
Thin red line
Potential ICO investors and those planning token sales were rocked earlier this month when the SEC issued a report on July 25. The SEC report offered a scathing indictment of ICOs, ruling that the vast majority of “initial coin offerings” were actually securities offerings dressed up under a thin veil.
We at Cointelegraph are in touch with some of the leading legal experts in the digital currency space, but there are not yet any clear guidelines for what the SEC might require in the future. Many planned are ICOs are still going ahead, but some are considering excluding US residents. This is not an ideal solution, however, as it seriously limits the amount of capital that such offerings might raise.
Ultimately, compliance costs are going to set a higher bar for entry into the ICO space. Companies contemplating ICOs will have to do thorough due diligence in order to avoid stepping afoul of regulators. This will limit the number of scammers able to solicit ICO funds, but it will also prove challenging to legitimate startups that need ICO funds in order to develop their products.
“I think the SEC Guidance regarding the DAO offering and the FBI’s takedown of BTC-e serves as notice to all issuers that their offerings are under scrutiny and they will be held accountable for breaking the law. While these actions have chilled the ICO market, they need not because platforms like Securrency ensure companies’ offerings are conducted lawfully, no matter where in the world their investors are located.”
- by Ted Moskovitz, Securrency advisor and former SEC lawyer
Securrency is one company seeking to provide companies and investors with compliance solutions. They have created a platform that will handle all KYC and AML across all global jurisdictions in order to save companies’ legal, regulatory and compliance costs.
John Hensel, COO of Securrency, says:
“By streamlining compliance, companies looking to raise money can save tens if not hundreds of thousands on legal costs for their offering doing compliance work for a global footprint. We want them to focus on what they do best: building the businesses and technologies to transform our world. Our role is to minimize the compliance burden while giving them the broadest access to capital.”
Although Securrency is still new to Blockchain-related investments, they have successfully brought an agricultural-related fund to market. The ‘International Agricultural Fund’ makes use of opportunities in China and Thailand, as well as other rapidly growing economies, and seeks an ROI of eight to 12 percent. Most important, it’s clear that the big money coming from traditional financial markets hasn’t been spooked by talk of bubbles and regulation.
Days are numbered
While the easy entry, low cost and openness of ICOs might’ve made the market so attractive, there are clearly going to be growing pains in moving forward. The fact that anyone could participate in an ICO, not just accredited investors, made them attractive to digital currency enthusiasts throughout the world. Because of upcoming regulation, such investors might have fewer opportunities to put their money to work.