I see many articles proclaiming the death of the Initial Coin Offering. Indeed, volumes of ICO funding have indeed gone down drastically. At the same time, many praise the Security Token Offering (STO) as the ‘next big thing’. The new hype, that will catch people off-guard. However, many misunderstand the differences…
On Monday, North American Securities Administrators Association (NASAA) announced Operation Cryptosweep: one of the largest coordinated series of securities enforcement actions ever. If you have been following the crypto space over the last two years, this should not come as a surprise. In fact, it was inevitable. Still, the scope of Operation Cryptosweep is massive.
Just 8 months ago, a blockchain project called Tezos raised $232 million with an initial coin offering. It was the biggest ICO ever. Arthur and Kathleen Breitman, the young couple that founded the project, literally raised over 10x more than their wildest estimates. 8 months later, the couple and the project is facing four class action lawsuits. How could it all go so wrong?
Last week, Blockchain at Berkely, a student organization dedicated to the promotion of blockchain research, held its first major blockchain event. One panel in particular drew my attention. You guessed it: it’s the legal blockchain panel.
During a speech at the Institute on Securities Regulation, the Chairman of the U.S. Securities and Exchange Commission, Jay Clayton, made a statement about a very important issue that might determine the future of ICO’s: Is an ICO an offering of a security or not?
The SEC has warned celebrities not to advertise ICO’s. The advertisement of ICO’s may be a violation of anti-touting provisions, make the person liable for potential violations of the anti-fraud provisions, for participating in the promotion of an unregistered offer and sale of securities and make the person liable for acting as an unregistered broker.
In this article, I argue that the problems we see in crypto today are caused by moral hazards and the idea of a ‘regulatory wild west’, and that law is a possible solution. However, the manner in which regulation is implemented is crucial, as ICO regulation should not be (too much of) a burden to innovation.