A good recap of the SEC Chairman Jay Clayton’s statement on cryptocurrency and ICOs on Monday. While he recognizes the potential of blockchain technology and token offerings, he notes that people have been scammed by fraudulent ICOs and that putting form over substance will not prevent the SEC from determining that a token should be considered a security. He encourages investors to remain open to these opportunities and do their research while engaging with the SEC to thoughtfully consider the regulations and guidance of existing securities law. 

“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.  However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.  A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, our securities laws must be followed.[4]  Said another way, replacing a traditional corporate interest recorded in a central ledger with an enterprise interest recorded through a blockchain entry on a distributed ledger may change the form of the transaction, but it does not change the substance.”

COO John Hensel of Securrency, a platform for KYC/AML compliant token offerings, had this to say: 

“The most salient message is in the last quoted paragraph of the original post. ‘Any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that securities laws require. A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, securities laws must be followed.’ Notice they didn’t say ‘attempted to be complied with,’ they said ‘followed.’ Those ICOs which either attempt to characterize themselves as utility tokens or fail to comply with the law when marketing, disclosing, or vetting participants are heading down a dead end path. The SEC and other regulatory bodies are not saying no to ICOs, they’re saying comply with the law and protect investor interests. ICOs can and will be offered in a regulatory compliant way in a mainstream fashion soon. As you know, Securrency has been developing a RegTech platform for the past three years to do just this – offer regulatory compliant Initial Token Offerings (ITOs) enforcing/ensuring KYC/AML for all participants. Identity proofing is central to any legal ICO as only eligible investors as defined by their jurisdiction may participate. This may not be popular with all (including non-accredited investors), but the law is what matters at this point, not inclusion. Law makers are elected so maybe the rules will change in the future, but for now ITOs must comply with today’s law. The good news is we are on the threshold of a global pre-IPO marketplace where capital can be matched to opportunity efficiently and legally. Regulators know the evolution of ITOs and DLT will yield great and positive outcomes; they just need ensure laws are complied with and investor interests are protected along the way.”

You can read the entire statement here: 
https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11
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