ICOs Are Subject To Strict Regulatory Scrutiny – SEC Chairman Jay Clayton

News, Regulation | November 27, 2018 By:

Jay Clayton, chairmain of the US Securities and Exchange Commission (SEC), has reiterated that many initial coin offerings (ICO) can be categorized as securities.

In an interview with CNBC, Clayton said that while bitcoin remains a commodity, other ICO tokens classify as securities and companies that want to conduct one have to adhere to any relevant legal requirements that the SEC has outlined.

“I think we’ve been clear that bitcoin isn’t a security, but many of the ICOs that you see and talk about – they are securities,” Clayton said.

In August of this year, the SEC issued draft guidelines for the conduct of ICOs, which defines the crypto fund raising scheme as “distributed ledger technology fund-raising operations involving the issuance of tokens in return for cash, other cryptocurrencies or other assets.” Under the draft circular, the SEC will assess an ICO in two stages, namely: the initial assessment and registration proper. The initial assessment will require ICO proponents to prove that the tokens they have are not security tokens, which are defined as “payment, utility, and/or asset tokens that satisfy the definition of securities under the Securities Regulation Code.

“We’ve had no ICOs register [with the SEC],” Clayton said “To the extent that an ICO is being conducted offshore or pursuant to a private placement exemption, fine; to the extent that you’ve conducted a public offering in an ICO, it’s non-compliant.”

During his interview, Clayton was also asked about issues affecting the crypto industry this year such as the possibility of a bitcoin exchange traded fund (ETF). He responed by saying that, “the bitcoin ETF is something that has been in front of the commission, I’m not going to comment on timing or anything like that, but we’ve been clear on some of the issues that are of concern to us, inlcuding trading in bitcoin and wether there’s reliable price information on trading markets as well as custody. So that people that hold those assets can count on those assets to be there in the same way you can in other assets that underlined an ETF.”