Section 11: What are the regulations in the ICO world?
When it comes to regulations in the ICO world, there are no strict laws regulating ICOs. In lieu of legal regulations, ICOs are bound by public vigilance, promoting practices such as the blockchain technology to offer transparency. The industry experts have long expected the government to step in and regulate ICOs. One of the recent regulatory developments in reference to ICOs has come from the US Securities and Exchange Commission (SEC).
In its latest ruling
on July 25, 2017, the SEC described some of the “coins” offered through ICOs as securities, and hence the applicability of the agency’s regulations. The SEC further released their investigation of an ICO conducted last year, the DAO, addressing the primary issues involving ICOs. Some of the key findings of the investigation were:
- “This Report reiterates these fundamental principles of the U.S. federal securities laws and describes their applicability to a new paradigm—virtual organizations or capital raising entities that use distributed ledger or blockchain technology to facilitate capital raising and/or investment and the related offer and sale of securities.”
- “The automation of certain functions through this technology, “smart contracts,” or computer code, does not remove conduct from the purview of the U.S. federal securities laws”
However, the SEC further mentioned that whether the issued coins qualify as securities or not will depend on the specific “facts and circumstances” of the individual ICOs.