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SEC Chairman Speaks Positively of ICOs, Cautions Adherence to Regulations

Distributed Summary:

  • SEC Chairman Jay Clayton called ICOs “effective ways for entrepreneurs and others to raise capital” in recent speech
  • Reiterated the fact that when “securities are being offered, our securities laws must be followed”
  • Announced the formation of a strategic hub for innovation and financial technology within the SEC

Jay Clayton, the current chairman of the U.S. Securities and Exchange Commission (SEC), acknowledged some of the benefits of ICOs in a speech to the commission.

Clayton addressed a wide range of financial topics, including the rise of crypto assets and distributed ledger technology, which he called an “area where the Commission and staff have spent a significant amount of time,” further elaborating that he “expect[s] that trend will continue in 2019.”

Clayton’s first remarks on the subject seemed rather in line with the established tone of the commission, as the crypto industry and ICO ecosystem have frequently chafed under a lack of cooperation from regulators. Clayton first addressed a “number of concerns,” claiming that the markets for crypto assets have “substantially less investor protection than in the traditional equities and fixed income markets, with correspondingly greater opportunities for fraud and manipulation.”

Despite this remark, Clayton did not present a negative view of the industry. He pointed out “that ICOs can be effective ways for entrepreneurs and others to raise capital,” qualifying this by saying that 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.”

At the very least, this shows that the highest levels of the highest regulatory agency in the United States has been forced to seriously evaluate the economic potential of distributed ledger technology. When compared to previous hostility from financial institutions, overtures such as this may mark milestones to future adoption.

To this end, Clayton announced “the formation of a new Strategic Hub for Innovation and Financial Technology (FinHub) within the agency” with the aim to develop a specialized and experienced unit that will oversee the SEC’s work on crypto assets and other financial tech issues, serving “as a public resource for fintech-related issues at the SEC.”

A specialized group like this may, by its very nature, involve more people that are sympathetic to the crypto question in financial regulations. It will certainly involve the people that deal with cryptocurrencies on a daily basis, and this is likely to be far better than a stance of outright ignorance.

Clayton concluded this portion of his speech by stating that “our door remains open to those who seek to innovate and raise capital in accordance with the law.”

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