U.S. Securities and Exchange Commission (SEC) chairman Jay Clayton has recently discussed some of the advantages that come with raising capital through Initial Coin Offerings (ICOs).
During last week’s speech focused on the SEC’s annual progress and agenda for 2019, Clayton stated that “ICOs can be effective ways for entrepreneurs and others to raise capital.” However, the SEC chairman also underscored a crucial caveat, adding that such crowdfunding initiatives must always be in adherence to prevailing securities rules.
As Clayton noted:
“The novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed.”
As the nascent blockchain and crypto industry continues to gain global traction, the commission and its workforce “have spent a significant amount of time” focusing on the nascent technology.
According to Clayton:
“A number of concerns have been raised regarding the digital assets and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in the traditional equities and fixed income markets, with correspondingly greater opportunities for fraud and manipulation.”
This would not be the first time the securities watchdog has addressed the risk of possible market manipulation in the crypto industry. During a previous conference, Clayton also indicated that:
“The prices retail investors are seeing are the prices they should rely on, and free from manipulation – not free from volatility, but free from manipulation.”
To further address the issue, a number of U.S. legislators have also recently drafted two bipartisan bills in an effort to prevent and mitigate potential price manipulation within the crypto markets. As indicated in the bill, the congressmen are calling on financial regulators, including the Commodity Futures Trading Commission (CFTC), to develop a roadmap to improve regulations governing crypto assets, in an effort to safeguard investor interest, as well as to further establish the position of the U.S. as a leading FinTech innovator.
During his speech, Clayton also highlighted the commission’s newly established Strategic Hub for Innovation and Financial Technology (FinHub), launched in October to help FinTech startups navigate the legal implications of their products and services.
“As the FinHub and our other activities demonstrate, our door remains open to those who seek to innovate and raise capital in accordance with the law,” Clayton stated.