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SEC Rules That ICO Tokens Are Securities (vice.com)

Posted by BeauHD on from the wild-west dept.

schwit1 shares a report from Business Insider: On Tuesday, the Securities and Exchange Commission (SEC) said that "ICOs" (Initial Coin Offerings) can sometimes be considered securities -- and as such are subject to strict laws and regulations. For the uninitiated, ICOs are a fancy new way of fundraising enabled by digital currencies like Ethereum -- participants invest money and receive digital "tokens" in return. Thus far, it has been largely unregulated, with some ICO crowdfunding events raising hundreds of millions of dollars -- leading some observers to argue that it is a massive bubble. But the SEC's warning means that this free-for-all may not last forever.

"Going forward, according to the SEC, companies that are issuing tokens as part of an ICO (if they are considered securities) need to register with the commission," reports Motherboard. "This will force companies to comply with regulations that ask them to reveal their financial position and the identities of their management. The SEC also concluded that online exchanges where tokens are bought and traded may have to register as security exchanges."

schwit1 adds a quote from Benito Mussolini: "All within the state, nothing outside the state, nothing against the state."

16 of 96 comments (clear)

  1. Overseas by dohzer · · Score: 3, Interesting

    So launch them overseas. Problem solved.

  2. This is healthy by Improv · · Score: 5, Insightful

    I have little sympathy for technolibertarians playing word games to dance around sensible regulation. Particularly when they grumble that sensible regulation is fascism.

    --
    For every problem, there is at least one solution that is simple, neat, and wrong.
    1. Re:This is healthy by Improv · · Score: 2

      The rights I care about are very differently flavoured than "opportunity to invest in a company", but yes. I think it makes sense to block people off from entirely screwing themselves over, and if that means less well-off people (often meaning people with no background in investment) can't invest this way, that's great.

      --
      For every problem, there is at least one solution that is simple, neat, and wrong.
    2. Re:This is healthy by Zemran · · Score: 2

      "entirely screwing themselves over" like people who invested in Bitcoin a few years back when they were $1 and now have something worth $1600... I wish I got screwed over like that. It does not matter. Such regulation is totally unenforceable and therefore totally stupid. More sensible governments are embracing such things and US people are totally welcome to invest in other countries under their laws. All this does is cut the US out of a growing sector.

      --
      I love stacking my barbecues in the shed at the end of summer - you can't beat a bit of grill on grill action.
    3. Re:This is healthy by infolation · · Score: 2

      I don't think you appreciate the size of Maddof's fraud.

      Or what Maddof's fraud was, in relation to possible ICO fraud.

      Maddoff was able to perpetrate his frauds because he operated a Ponzi scheme within an investment black box that hid the mechanics of what and how he was investing funds.

      Good or bad, a DAO or any ICO operating directly on the Ethereum blockchain is, by definition, transparent. Anyone who can read solidity can look at its code and understand what it does, and will do in the future.

      If a reckless investor nevertheless puts money into a scheme that isn't governed by a democracy (smart) contract that gives them voting rights on whether the code base is changed, that's their fault. But the code is not a black box, as in Maddof's case.

      The SEC exists because, currently, financial institutions operate in a way that is very much un-transparent, and depend on investors trusting that the institutions are doing what they say they will do. Therefore the SEC is needed, to provide oversight of those 'black box' operations.

      A DAO is supposed to sidestep this, and enforce transparency by design. Which begs the question: does the SEC even understand why it's not needed to regulate DAOs or ICOs relating to DAOs on the blockchain?

    4. Re: This is healthy by religionofpeas · · Score: 4, Informative

      Starting a business is not the same thing as funding a (someone else's) startup.

    5. Re:This is healthy by Tenebrousedge · · Score: 2

      the US is already 20 TRILLION in debt

      That number includes debt owed by the federal government to itself. The bad day for the US is not when we have lots of outstanding debt, but when no one wants it any more. The actual $13.62T of debt is an enormous bet that the US will remain solvent. No informed persons worry about hyperinflation, and the topic of public debt is not particularly relevant. The SEC is attempting to regulate ICO tokens as investment vehicles because people keep trying to use them as such. There is zero reason to believe in the rest of your fantasies.

      --
      Those who advocate genocide deserve every protection afforded by law, and none afforded by common human decency.
  3. So we start with Godwin and work our way back? by Frank+Burly · · Score: 5, Funny
    The actual statement by the SEC is here: https://www.sec.gov/litigation....

    It looks like people are investing money to obtain an interest in an item with no practical use other than as an investment

    I am reminded of https://xkcd.com/1494/

  4. Oh puh-leeze. Mussolini? by ClickOnThis · · Score: 3, Insightful

    I understand that many advocates of digital currencies sing the praises of their libertarian, state-independent qualities.

    But conflating the SEC with Mussolini? Come on, the purpose of the SEC is to protect investors from unscrupulous companies. Do you really want the kinds of markets we had before the SEC was around?

    --
    If it weren't for deadlines, nothing would be late.
    1. Re:Oh puh-leeze. Mussolini? by anarkhos · · Score: 2

      the purpose of the SEC is to protect investors from unscrupulous companies. Do you really want the kinds of markets we had before the SEC was around?

      It's irrelevant what the purpose of a law or agency. The only thing that matters is its effect.

      Yes, the markets functioned better before the SEC. The real intent of the SEC is to make sure you're not allowed to invest in competing financial instruments and to make investors completely and utterly gullible.

      --
      >80 column hard wrapped e-mail is not a sign of intelligent
      >life
    2. Re:Oh puh-leeze. Mussolini? by NoMaster · · Score: 3, Interesting

      Not to mention the Mussolini quote dates from 1928 - a time when the USA didn't have a "rah rah democracy" foreign policy, fascism was considered a valid style of government and not a dirty word, and Coolidge, Hoover, and FDR were supportive of what they saw as a libertarian progressive Italian government that would resist Communism...

      --
      What part of "a well regulated militia" do you not understand?
  5. Re:Thanks by PPH · · Score: 2

    Avoiding a Godwin Law ruling on a technicality: Good job schwit1.

    --
    Have gnu, will travel.
  6. Re:Cows are already out of the barn by phantomfive · · Score: 2

    They can start arresting them one by one, and the cows will all return. No cow wants to be made an example of.

    --
    "First they came for the slanderers and i said nothing."
  7. Re:Court Challenge by DerekLyons · · Score: 5, Interesting

    Seriously, Etherium, Bitcoin and the like are unique mathematical stores of value, more similar to that rare drop you got in your MMO than a security instrument.

    It's funny... all the alt.currency advocates were all about how "cryptocurrency is real money" - until the government started actually treating them as real money. Now they're backpedaling.

  8. Re:Court Challenge by Interfacer · · Score: 4, Insightful

    If I hadn't already posted I'd have modded you up. Either it is money or it is glorified pokemon cards. You can't have it both ways. Tbh I think it is good if it's going to be treated like money. I'd love for institutional money to flood in. Especially since I am already holding coin.

  9. Re:Court Challenge by mysidia · · Score: 2

    Now they're backpedaling.

    Not really... it's "Real money" in the sense that you can reliably transact with it.

    It's not "Real money" in the sense that it is not a government-issued currency.
    Unlike real money, the government didn't make it and retain the rights to it --- so it's "More real" than money in the sense that it is more like tangible property with intrinsic value, and not something that can be arbitrarily manufactured.