The U.S. Securities and Exchange Commission (SEC) has been vocal about initial coin offerings (ICOs) and how the unexpectedly growing investment method that has been taking both local and international markets by storm would need to fall under proper regulations.
Following the same stance, it was recently reported by the Wall Street Journal that the SEC has issued subpoenas to various entities that had previously been or are currently involved with ICOs.
Four unnamed sources, who could not share their identity to maintain confidentiality, confirmed that they had seen some of the subpoenas which were issued to entities across the country, including New York, San Francisco, and Boston.
According to those sources, the subpoenas have been issued to companies that raised funds through ICOs, as well as other firms and individuals such as advisory institutions and lawyers who helped in facilitating the ICO operations.
The sources confirmed that the requests for information had started being sent last year, and the SEC has continued the practice this year as well.
Through the subpoenas, where relevant, the SEC has asked for information on the ICOs, the cryptocurrencies that were involved within the sale, the way that the ICOs had been marketed, and the identities of the individuals behind the ICOs.
It was further mentioned that collectively, the subpoenas and requests for information had been issued to around 80 companies, which would make this operation a significant one.
What would have led to this?
Just last month, Jay Clayton, the chairman of the SEC, had appeared in front of the Senate Committee on Banking, Housing and Urban Affairs to record his statement on the role of cryptocurrencies and ICOs.
In his statement, he had mentioned that ICOs need to be treated as “securities,” where they need to follow proper regulations in return for the request of investment from the general public.
While those thoughts had been in line with several other instances on which similar comments were shared by the SEC, the step that has now been brought to light is related to additional comments that Clayton had made at the Securities Regulation Institute last month.
During his speech, Clayton had mentioned that from what he has observed, “market professionals, especially gatekeepers” that facilitate ICOs need to up their game and “can do better.”
He had further stated that among many other scenarios that he had observed, the “most disturbing” one was where lawyers, even after all signs pointing out that a particular ICO has all the makings of a security and thus needs to be registered for regulations, somehow overlooked the requirements and let the ICO go ahead with its unregulated operations, which actually puts investors at risk.
What’s the way forward?
Since it seems that the subpoenas and requests for information are being issued for the past few months, it would not change anything right away. However, the way that this move is being carried out alludes to the possibility that after collecting enough data, the SEC might eventually crackdown on ICOs in a manner where it has formed unescapable regulations to control their operations.
While this would work towards curbing the actions of bad actors that have actually misused ICOs to carry out fraudulent operations in the past, it would also create issues for new startups that would have to go through additional and most possibly cumbersome steps just to start raising funds for their new venture.