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SEC not relenting on ICO regulation, despite unprecedented clampdown

23 Dec 2019   #Ethereum

The earlier days of Bitcoin’s growth did not see the level of regulation currently undertaken by the U.S. Security and Exchange Commission (SEC). Because of the seeming characteristics of Bitcoin, regulators found it difficult to monitor and keep the operators and management of the currency in check.

Bitcoin is transparent, irreversible, uses an assailable technology, and cannot be held massively by a single person. These all made it very difficult for the SEC to get a stronghold when it comes to regulations. But it seems SEC is gradually crossing that bridge if what has happened this year is anything to go by.

Experts say digital currency regulators did not sit back to watch the prominent rise of Bitcoin in the past few years. Instead, they tightened their regulatory belt and started an unprecedented crackdown on the market. And the U.S. SEC has been at the forefront of it all.

Crypto issuers tried to change the regulatory requirements

To escape the regulatory bottlenecks of security regulations, many crypto issuers started registering their issuances as tokens.

The Co-director of Securities Enforcement at the SEC, Stephanie Avakian, stated that these crypto-entrepreneurs were trying to avoid getting into the black books of SEC. Hence, they opted to register their securities as tokens. But SEC was taking none of it, as seen in the recent clampdown against some crypto issuers this year.

She reiterated that SEC has clarified that companies who wish to register securities through ICOs must comply with the regulations guiding securities registration. She said the commission would not stop prosecuting those who violate such security laws.

The Digital asset market community has had divergent views on the recent clampdown of SEC on some token issues. Investors and experts in the industry think some of the cases where deliberate manipulation, while some other token issuances were genuine.

A perfect example of an intentional manipulation is that of Maksim Zaslaviky,  who issued ICO for two different projects, Diamond and Recoin. Stephanie said Maksim has already accepted wrongdoing in committing securities fraud. She also pointed out that the current laws on digital currencies were not enough to eradicate bad eggs in the market.

SEC undeterred on its regulatory goals

SEC Chairman, Jay Clayton, cleared a mistaken motion about what constitute securities and what does not. He stressed that the commission is regarding all ICOs as securities, stating that the SEC's role is to regulate all securities. He reiterated that the commission is not going to slow down on its resolve to sensitize the digital currency industry.

Clayton further stated that those that want to offer their stock or ICO in a private placement should abide by the rules on private placement. But if they want to register a token as an IPO, they should first go through the commission. He said the commission had made a concerted effort to clear the air on the regulation and guidelines surrounding ICO, but some people still want to go through the back door. According to him, these are the type of people SEC want to stop by all means.

Author: Ali Raza for

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