The U.S. Securities and Exchange Commission highlighted its “guide to initial coin offerings” in a Twitter post Sunday. The post linked to a page on the SEC’s website that highlights digital assets’ “increased risk of fraud and manipulation” due to their lack of regulation. Many twitter users were quick to point out the one thing that the “guide” doesn’t do: namely, offer any real regulatory clarity for ICO issuers or others in the industry.
The guide offers 5 things that the SEC says everyone needs to know about ICOs. They include the following five statements:
ICOs can be securities offerings.
They may need to be registered.
Tokens sold in ICOS can be called many things.
ICOs may pose substantial risks.
Ask questions before investing.
Unfortunately, those boilerplate statements are unlikely to provide anyone in the industry with the clarity they need to understand how the SEC views any given project. For example, the first statement is relatively noncommittal and the expanded text for that section offers little additional clarity, simply noting, “ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws.”
Like the rest of the “guide” text, however, that explanation raises more questions than it answers since it offers no insight into which “specific facts” might cause the SEC to determine that a project should be defined as a securities offering.
Though the guide content has apparently been online for nearly a year, it’s noteworthy that it continues to offer little real guidance for the industry – in spite of the fact that ICOs have been on the commission’s radar for two years now.
The text advice for investors is perhaps more illuminating, though its warnings are also relatively generic as well. For example, the SEC advises investors to be aware of the added risk associated with products that can be easily traded internationally. It also recommends that they research the offering’s presenter, learn how the product is traded, and exercise caution if an offer sounds like it’s “too good to be true.”
Perhaps the only thing that the guide truly manages to clarify is that the SEC appears to be unwilling to provide clear guidance, especially when it comes to specific criteria. As observers have noted for some time, the agency seems content to rely on enforcement action to address problems in the industry rather than clarifying the rules and then exercising oversight.