With record capital raising occurring in the world of cryptocurrency ICOs, the Securities and Exchange Commission has stated that virtual currencies and tokens issued by an initial coin offering, or ICO, are considered the same class of asset as securities.
They, therefore, should be subjected to the same regulatory structures and bylaws that govern said securities, including the necessity to register pending coin offerings with the SEC.
The pace of ICOs has been escalating dramatically in 2017, with over 800 cryptocurrencies now available on the open market. The SEC has been working to slow the pace of these launches and start-ups have been hiring legal talent to determine the legal requirements and remain in compliance.
Blockchain analysts have reasoned that the SEC ruling has been a definite turn for the ICO market, where the increased regulation would be able to stem the ongoing fraud and shady dealing in the ICO market. The SEC monitoring benefits legitimate investors by encouraging risk-averse investors to become active in buying the token offerings.
However, it would see that the warnings of the SE have fallen upon deaf ears in the world of ICOs, with new offerings failing to register with the authority and the SEC unable to provide any form of penalty to these start ups. Most ICOs have very little interest in following theSEs rules given the pace of new IO offerings and choose to ignore the advice of the regulatory authority.
Industry professionals in the legal environment are concerned that startups have failed to comply with the SECs requests. Since the issuance of the guidance formally issued on July 25, over 40 new coin offerings have come to market seeking a capital raise. There are also a further 200 plus offerings set for release shortly.
Despite the lack of regulation, the ICO market is scheduled to exceed all previous VC funding in the Blockchain space by the end of 2017. Reports from news authorities, the New York Times, stated that July 2017 was the most successful month in ICO history, with over $665 million raised for new coin offerings. It seems that starting a new token is as easy as creating a Spiel Scribes video.
The most shocking part of this statistic is that this month’s capital exceed all the previous five months combined, shoe in the acceleration within the ICO space and the reason for the call to alarm. Initial Coin Offerings have outperformed all seed-stage and angel funding for all online firms since the beginning of the second quarter.
Cryptocurrency has a decentralized nature, one of the primary reasons why the asset class has succeeded outside the current global monetary system. It has allowed Blockchain startups to leverage regulatory arbitrage to its maximum.
Essentially it is like asking the question of why would ICOs waste their time registering with the US regulatory authorities when they can set up shop offshore in Switzerland or Hong Kong? All facets of cryptocurrency continue to disrupt the list monetary system and its modern money mechanics. They achieve this by circumventing regulation, using the loopholes and inefficiencies of the current regime. This fact is the seed of innovation and the source of freedom that world governments and central banks are beginning to take note.
In 2016, China announced plans to create its virtual currency regulated by the PBoC, which would ironically be against the decentralized nature of cryptocurrency. Recently, Russia has announced plans to build a state-owned cryptocurrency mining operation. ICOs will continue to seek and find funding, as well as set new records for VC capital raising, as long as there is a market for them to do so.
With the price of Bitcoin surging to new highs above #3,500 and Ethereum achieving a 400% gain, cryptocurrency is the choice of speculators across the world. As governments continue to fall in line and recognize the legitimacy of crypto, they sow the seeds of doom for their central bank created fiat currencies. This fact begs the question of how long this current boom in IOs will last? Are we at the beginning or the end of the world’s greatest asset bubble? Only time will tell.
With global governments now executing upon strategies to harness the opportunities found in Cryptocurrency, maybe it’s about time we all started to pay closer attention to what’s going on as well?