Ethereum Nosedives As SEC Opens Investigations On Dozens Of ICOs Built On The Blockchain
SEC scrutiny of ICOs (initial coin offerings) has grown significantly since billions of dollars in digital assets were sold during 2017, many of which were based on the Ethereum blockchain. "We are very active, and I would just expect to see more and more," Avakian said at a conference in Washington.
At least six actions related to cryptocurrency have been brought against various companies since September 2017, reports Bloomberg. All of those actions came after the SEC issued a report that found digital tokens sold to raise capital were actual securities and were applicable to U.S. law. On March 7, the SEC issued a statement that reminded cryptocurrency trading platforms that many would need to register with the SEC as exchanges, to be in compliance with U.S. law.
The SEC statement reads in part, "A number of these platforms provide a mechanism for trading assets that meet the definition of a "security" under the federal securities laws. If a platform offers trading of digital assets that are securities and operates as an 'exchange,' as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration. The federal regulatory framework governing registered national securities exchanges and exempt markets is designed to protect investors and prevent against fraudulent and manipulative trading practices."
The SEC notes in the statement that investors seeking protections offered by federal securities laws and SEC oversight when trading "digital assets that are securities," should only use a platform or entity that is registered with the SEC. The SEC recommends using a national securities exchange, alternative trading system (ATS), or a broker-dealer.
The SEC isn't alone in fearing ICOs; the co-founder of Ethereum has warned that ICOs are ticking timebombs in the past. SEC chairman Jay Clayton also sounded a warning bell for investors back in December 2017.