Why SEC’s Recent Efforts to Create US-Compliant ICOs Matter
Recent moves by the US Securities and Exchange Commission (SEC) can improve the conduct of initial coin offerings ICOs globally. It wants to improve communication and understanding with emerging technology startups. Besides, it plans to clarify when and how cryptocurrencies are securities.
These two issues are key to ensure that the crowdfunding mechanism thrives in the US as a big market to boost the crypto industry. Many ICO projects avoid reaching or accepting contributions from the US for compliance reasons. It has somewhat limited the concept’s scope by creating the need for excess precautions. There comes in the creation of the Strategic Hub for Innovation and Financial Technology (FinHub) by the SEC.
The FinHub seeks to ease the “SEC’s active engagement with innovators, developers, and entrepreneurs”. It will be a resource for information about the regulator’s views and actions in the FinTech space as well as have direct engagement with SEC staff. It opens a commendable formal channel of communications with market participants.
The CEO of Republic, Kendrick Nguyen, notes the importance of open dialogues between regulators and the private sector. It helps existing legal frameworks to adapt to technological changes without undue free market interference. He added that the move could see more blockchain projects use crowdfunding to raise capital due to regulatory supports.
“This open dialogue should also encourage the SEC to provide more clarity to the blockchain industry more quickly. It will also provide companies with the necessary guidelines on all securities exemptions and existing legal frameworks,” Nguyen says.
With regards to ICOs, US laws only allow accredited investors to partake in private placements of securities. FinHub could bring clarity to some of the debates surrounding what makes up a compliant ICO in the US.
At the D.C. Fintech Week conference, SEC director, William Hinman, hinted at the agency’s plan to release a simple ICO guidance for developers. It will help determine whether a token offering may be classified as a security or not.
Hinman notes: “We’ll elaborate on that in a very plain English way, so ‘do I think I have a security offering,’ look at that guidance and you should be able to sort things out.”
The SEC has encountered several issues relating to the blockchain sector in the past. The proposed guidance and improved communication can help to conduct ICOs with less complexities. They can help ease up the bottlenecks related to the concept.