> I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects.<p>> We at the SEC are committed to promoting capital formation. The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so.<p>I don't know much about Jay Clayton (SEC Chairmain) but he seems to be taking a very pragmatic stance on tokens. From what I gather, he's saying that <i></i>some<i></i> of these tokens should be classified as securities, while others should not. And we as investors should be be diligent to probe the creators to see if these tokens are subject to regulation and are legal.<p>This is amazing! The SEC haven't <i></i>quite<i></i> stepped in yet. But I fully expect them to. And this gives some great insight into what we can expect in the future.
This is not a statement from the SEC, but from chairman Clayton. See footnote [1]: «<i>This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product.</i>»
An incredible display of pragmatism from our regulators. Given the commentary on HN it seems that most here want everyone involved in an ICO to be thrown in jail. ICO’s are an effective way to raise funds from a global pool of enthusiasts. The Ethereum blockchain itself was funded from an ICO, and it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC for a 22 year old kid like Vitalik. Very, very good news.
> Sample Questions for Investors Considering a Cryptocurrency or ICO Investment Opportunity<p>What a great move by the SEC. I think Ethereum, as a vehicle for many/most ICOs, owes it to the community to embrace this list and create a standard disclosure form that encourages new ICOs to answer these. And if Ethereum offers an index of tokens somewhere (I'm not familiar w/Ethereum's details), it could indicate which ones answered some/all of the questions in the form.<p>BTW industry/trade groups is how lots of businesses avoid regulation. Entertainment industry especially; e.g. ratings and content guidelines from MPAA/ESRB/Comic Code.
A little emphasis, focusing on the aftermath from the SEC's July report on the DAO:<p>> "Following the issuance of the 21(a) Report, certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities. <i>Many of these assertions appear to elevate form over substance. Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.</i>"
It's way down, but this strikes me as the key section:<p>---<p>By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved.<p>I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws.<p>---<p>That seems a pretty clear warning: most ICOs will be treated as securities under US law. I'd be willing to bet that the SEC will be making an example of some people relatively soon.
Jeff Bezos once asked Warren Buffett why people did not follow Buffett's model of investing, since it had made Buffett the third richest person in the US. Buffett replied, "no one wants to get rich slowly".
I wouldn’t read this with rose colored glasses. This is not pro or against crypto. He’s simply doing what the SEC does and warning speculators of the risks involved and saying that these <i>will</i>, despite what anyone has told you, be subject to federal securities laws.
Jay Clayton<p>'1] This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product. '<p>Intriguing that this is a personal perspective....
"In contrast, many token offerings appear to have gone beyond this construct and are more analogous to interests in a yet-to-be-built publishing house with the authors, books and distribution networks all to come."<p>I am impressed with this SEC statement.<p>The problem right now is with ICOs that sell tokens for something that doesn't already exist yet, as well as promise returns.<p>Selling a token for something that doesn't exist yet is clearly a security. Whereas selling a token that already exists, and doesn't need any additional things to be built, is probably not a security.<p>I am glad that the SEC seems to be getting things right.
What the SEC seems to be doing is 1) warning ICO promoters that what they're doing may be illegal, and 2) going after the worst offenders first. The SEC has already acted against two ICO promoters, both of which were clearly running scams. There will probably be more actions.
<i>As I have stated previously, these market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other.</i><p>I think for a long time this is how crypto is viewed, it is risky but people are willing to take the risk currently. More reputable US sources like Coinbase are making this possible rather than historical risky bets like mtgox, btc-e etc. In the statement they do mention whether an ICO is domestic/foreign in their research as something you should look out for in terms of the "security" of your purchase, but also whether or not the SEC can even do anything about it.<p>Regulation will be coming along and they have a blueprint for how that might happen, i.e. securities vs tokens/coins/currency. Before the regulation the risk is higher but probably also the reward.<p>At this point cryptocurrencies and ICOs are an unstoppable train, either the SEC will be able to regulate currencies + securities or some new group will be formed to handle oversight in the US at least.
It's obvious the SEC intends to enforce securities regulations on crypto markets. The big exchanges already and typically employ experts in regulatory compliance specifically related to AML and KYC laws on a federal and state-by-state level. The reason being access to Americans is by and large more important than access to any other set of customers. And "everyone" knows ICO's exist only to side-step securities laws and make a quick buck. There are very few legitimate offerings. Expect the SEC enforcement arm to come down like the hammer of god.<p>What I find funny is this idea crypto won't be the next level of monitoring and control of the money supply. You crypto proponents are going to be very unhappy when you see what Uncle Sam has in store. Fiat currency has much better built-in anonymity then this block chain nonsense. And see how that is controlled, regulated, and tracked through treaties, laws, and digital mechanisms?
Does anyone know if the SEC has any process to formally approach them and say "This is what we're planning on doing and the structure we're planning on using -- this where we're unclear; how would you treat this?" like the IRS has with Private Letter Rulings/Written Determinations?
Sounds like - do what you want at your own risk and due diligence. I can't help but think that large financial institutions and governments are also behind the crypto madness in order to make money on the retail's back. Otherwise, this would have been stopped by now.
Can someone explain to me how his "book of the month" club example is not a security? The managerial efforts of the club managers will increase demand for participation in the club, increasing the value of the token. What am I missing?
This is quite positive and in line with how ASIC (our SEC in Australia) are treating these types of assets.<p>Both are quite opposite to the way China is handling ICO's and crypto currency in general.
> encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so.<p>so what, are we going to stop seeing "US IP detected, unable to participate" in ICOs?
Side note but: I asked here if anyone's actually using an ICO project:<p><a href="https://news.ycombinator.com/item?id=15901992" rel="nofollow">https://news.ycombinator.com/item?id=15901992</a><p>Didn't get much traction. :(
I think the rate of technological change will force the SEC regulatory system to adopt an RFC process open to the public (bypassing Congress), similar to IETF, and I think Direct Democracy is an inevitable outcome of such disruption.
Seems to me this is just a warning so that when both the SEC and US Treasury lay into cryptos next year they won’t feel so bad about everyone losing their BTC/ETH “fortunes” overnight.