Investment in the crypto space has gone ballistic. When it was just a few million dollars here and there, it was just a niche experiment. Now that there are billions in investments going in, and market capitalizations of coins are measured in hundreds of millions and even billions of the top players, regulators are being forced to take a closer look.
The amount of money raised by ICO cumulatively is nearing $4 Billion since 2014.
But we can see that the vast majority of it has been this past year. With crypto assets on the verge of going mainstream and nearly every industry exploring blockchain technology, the current ICO regime has attracted billions this year alone, and with that comes regulatory scrutiny.
Along with that increase in attention from regulators worldwide, development teams looking to raise capital for their projects are being more careful about how they are interacting with potential investors. More and more they are changing their marketing terminology, and specifically referring to ‘tokens’ rather than coins, cryptocurrencies, or crypto assets.
They are avoiding anything that sounds like their product acts as a currency or security.
Furthermore, they are using terms like ‘donation’ rather than investment, which could suggest an expectation of profit, one of the points in the Howey test.
Some ICOs are not allowing US or Chinese citizens to invest, due to the potential for future regulatory problems in those countries. It is currently not illegal to invest in an ICO in the US, nor is it illegal to conduct an ICO, but developers are seeking to stave off future regulatory scrutiny as a precaution. Once the ICO is over and the tokens are trading on exchanges, there are no longer restrictions for the US investor to buy those coins. This practice is not necessary and has the negative impact of limiting US investors participation in many opportunities.
ICOs are so readily available to almost any investor because of the lack of requirements and regulations and provide a great alternative to traditional markets. This has been a technological and economic godsend, since outside of Silicon Valley, blockchain and the ICO ecosystem are truly one of the few areas in the US where dynamic creativity, innovation and disruption are flourishing. This precious freedom may be lost if regulators ultimately take a heavy-handed approach to the sector. We are already seeing dozens of exciting projects originate overseas and refuse to even entertain a US presence.
Clumsy regulation would hasten this flight, and deprive the US of many of the financial and economic benefits of this capital & technological revolution.
How the SEC will ultimately rule is unknown as there has been little guidance from them. Will they regulate the ICO process only and leave existing crypto assets unencumbered? Will they recognize this whole phenomenon as a new asset class or just shoehorn it into their existing and exhaustive list of potential securities? All this remains to be seen.
Written by The Crypto.IQ Team
Charlie Shrem is a Bitcoin pioneer. A social economist. A digital currency trader who has made millions. His work in this field is legendary. In 2011, at the dawn of the crypto era, he founded BitInstant, the first and largest Bitcoin company.
In 2013, he founded the Bitcoin Foundation and serve as its Vice Chairman. Since then, Charlie has advised more than a dozen digital currency companies, launched and managed numerous partnerships between crypto and non-crypto companies, and is the go-to guy for some of the world’s wealthiest entrepreneurs. In short, he is the ultimate insider at the epicenter of the crypto universe. Charlie holds a BS in Finance and Economics from City University of New York and studied at Florence University of the Arts.
Charlie Shrem isn’t the only legendary trader on the CryptoIQ team. Randall Oser founded TRK Group in 1999 leading the company as its Head Trader until its sale to E*Trade in 2003. He grew TRK to 150 employees while deploying over $100 Million in trading capital. He trained dozens of Wall Street traders on not only how to make millions of dollars but more importantly how to preserve their newfound wealth.
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