The U.S. Securities and Exchange Commission (SEC) has concluded that digital asset offerings, such as initial coin offerings (ICOs), amount to securities and are subject to securities laws.
The SEC has issued an investigative report — and an investor alert — advising that it views offers of digital assets utilizing blockchain technology as securities; and that the offerings may be subject to securities law. The SEC notes that the question of whether a particular transaction amounts to a securities offering will be dependent on the specific facts of the deal.
“The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,” says SEC Chairman Jay Clayton, in a statement. “We seek to foster innovative and beneficial ways to raise capital, while ensuring — first and foremost — that investors and our markets are protected.”
“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets,” adds Stephanie Avakian, co-director of the SEC’s enforcement division.
Along with the report, the SEC’s Office of Investor Education and Advocacy issued an investor bulletin highlighting the regulatory and legal status of ICOs and similar offerings to investors.
“Developers, businesses, and individuals increasingly are using initial coin offerings, also called ICOs or token sales, to raise capital,” the bulletin says. “These activities may provide fair and lawful investment opportunities. However, new technologies and financial products, such as those associated with ICOs, can be used improperly to entice investors with the promise of high returns in a new investment space.”