SEC Talks about Registration And Nature of Tokens in its New Guide to ICOs

Witnessing the upsurge in the crypto market and enthusiasm among the investors, the US SEC has shares a new blog post to educate about ICO’s. It majorly focuses on the three R’s – Risks, Rewards, and, Responsibilities.

ICO in the past scenario

An ICO otherwise called a “token sale” or “token launch,” is where a company is creating a new product with an associated utility and wants to build an ecosystem of stakeholders upfront who will benefit from purchasing the product early. This token sale enables the company to further develop their product with an established user base, and the company can use some of the proceeds to build the product.

The US regulatory landscape has been changing gradually over these last few months. SEC has also been showing positive sentiments towards cryptos. A recent trend towards institutional participation and investment in cryptocurrency is further changing the stakes.

Related: SEC won’t be Bending Rules for Cryptocurrency: SEC Chairman

Focusing on the three R’s

The recent guide issued by the US SEC on ICO majorly focuses on the three R’s- Risks, Rewards and, Responsibilities. The post cover the following points:

Risks- ICO have a higher degree of risk involved.

Responsibilities-  ICO’s need to be registered as such.

Rewards- All tokens are not securities but some shall mask their true nature through mislabeling.

It helps in making the investors aware of all the potential risks in the market and provides them with necessary safeguards to protect themselves against these risks. The official post reads:

– Investors must be extremely careful and cautious. They shall make complete research about their investments. They should look at the business model and the team behind the ICO is very limited in nature to assess its regulatory nature/legal status and how feasible it is for the business.

– Cryptocurrency in itself is a very wide concept which comes with several advantages as well as disadvantages, and therefore the protection that a local financial watchdog (such as the SEC) can afford feasibility.

To issuers of ICOs, it explains that it is their responsibility to decide if their product is a security. This is equally true of businesses that facilitate the trading of tokens – if they are securities, the exchange must register as a securities exchange.

The US SEC has been working since quite some time to ensure the safety of their investors in the crypto market. Recently, a mock fraudulent ICO was released which was just another initiative to educate the public as to what do they really need to look out for.

US regulatory authorities have been noticed to be quite particular about the practices in the crypto market. Back in 2017, there was lack of any contribution and developments from the authorities.

But witnessing the upsurge in the market the SEC is continuously introducing new points and updating the investors to ensure their safety.

What are your views on the latest effort by SEC to educate the crypto investors? Share your thoughts with us!