Hester Peirce, Commissioner of the Securities and Exchange Commission last week made a proposal that, if approved, may legalize Initial Coin Offerings (ICOs) in the United States
ICOs reached peak popularity in 2017. ICOs are akin to a public offering in the cryptocurrency world. These offerings allow companies to sell tokens to investors and raise money.
Peirce’s plan made public at the International Blockchain Congress in Chicago on Thursday would allow ICO sales as long as they are compliant with specific rules.
Peirce proposed guardrails such as companies would be required to publish information in detail about projects they want to undertake on their websites. ICO team member identities would have to be revealed, as well as project source code, names of financial beneficiaries and transaction histories. Companies would also have to file a notice of documents with SEC’s Edgar system.
Why It Matters
The SEC has deemed the sale of such tokens in ICOs as an illegal sale of securities. In December 2017, SEC Chairman Jay Clayton released a statement saying, “Selling securities generally requires a license, and experience shows that excessive touting in thinly traded and volatile markets can be an indicator of 'scalping,' 'pump and dump' and other manipulations and frauds.”
According to Fortune, should Peirce’s recommendations be adopted the United States would shed its image of being a stifler of innovation. It would also put the country on par with other jurisdictions like Asia and Switzerland.
However, there are concerns that the proposal made by Peirce, also known as “crypto mom,” could open the floodgates of fraud. Peirce said her proposed guardrails would protect investors while allowing innovation to flourish.
Unscrupulous behavior by technology companies raising money through ICOs was unmasked by Wall Street Journal who found 271 red flags in documents related to 1,450 coin offerings. The newspaper found plagiarized investor documents and fake executive profiles as well as promises of guaranteed returns.