The Securities and Exchange Commission is looking hard at Initial Coin Offerings. The regulation agency may be getting more aggressive because cryptocurrencies are growing more visible and valuable. The reason is they lack transparency and oversight.
A Reuters article published Wednesday said:
“The Securities and Exchange Commission is said to be taking a hard look at the increased use of such offerings, with the growth of so-called ICOs surging in recent months. The overall value of the coin market is estimated at over $90 billion, and the frenzied activity has fueled a record-breaking rise in the price of bitcoin, which hit an all-time high of $2,911.86 this week, according to the CoinDesk Bitcoin Price Index (BPI)”
The regulators believe everyone needs protection from those startups which attempt to generate revenue from their projects.
Many people are worried about blockchain-based companies because they are virtually free from any type of official scrutiny. They mine or generate their coins, and then sell them to early investors in “initial coin offerings” to fund their company’s projects. And generally, these coins have had an opportunity for a lot of upward momentum on the marketplace because of early speculators looking to cash in.
However, in the past, these ICO’s have not always been safe for investment or speculation. There have been accidents, but there have also been sketchy projects that reeked of pump and dump and pyramid schemes.
At this stage of the game, it is difficult to determine if a project is legitimate or not. In theory, it would be easy for an Initial Coin Offering to pump their tokens, dump, and run.
With how easy it appears to initiate an ICO scam, or for investors to lose millions of dollars—because a line of code is incorrect—it seems natural for politicians to want to regulate the industry. However, there is not a simple strategy for governments to accomplish this task. Various agencies have not even determined what asset class many cryptocurrencies fall within. Furthermore, banks, governments, and regulatory agencies sometimes appear confused about the technology. For instance, investment bank Morgan Stanley recently mentioned that for cryptocurrencies “to grow” they would need to be regulated, and a politician from Australia loosely admitted government does not know enough about them to do anything.
As of right now, it is unclear whether regulations for ICO’s are looming on the horizon, but there is a lot of hullabaloo being stirred up within official circles about how to effectively control cryptocurrencies. The irony of the situation, however, is not lost on the crypto-community.