The president of the Chicago Board Options Exchange (CBOE), Chris Concannon, says coming Securities and Exchange Commission (SEC) regulations for initial coin offerings (ICOs) will have catastrophic effects for investors and the market. He says “the reckoning will come in two waves” and “it should be keeping investors up at night”.
CBOE is the largest options exchange in the United States which facilitates the trading of over 1 billion contracts per year for 2,200 companies, 22 stock indices, and 140 exchange-traded funds. It was one of the first places to offer Bitcoin futures contract trading, so has expertise in the cryptocurrency world, while Chris Concannon is well known as a prominent cryptocurrency advocate on Wall Street.
Recent statements from the SEC indicate that most ICOs will be regulated as securities and must have proper clearance and licensing from the SEC in order to legally operate. Basically, any cryptocurrency that is created and sold for profit by an individual or organization, where investors expect a return on their investment, will be considered a security.
Concannon expects the SEC to take legal action against individuals and organizations conducting and investing in ICOs, and indeed this has already started with dozens of cryptocurrency firms subpoenaed this year. There will be severe consequences for anyone trading and propagating securities without a license. It is possible that the SEC could take retroactive legal action since security laws have been in place the entire time and, therefore, most of the ICOs in history have illegally raised funds by selling unregistered securities.
The result of this storm of lawsuits would be that ICOs considered unregistered securities could lose all of their value, which would cause investors to start suing each other and ICO teams for selling unregistered securities in an attempt to recover losses. A professor at Cornell University, Robert Hockett, said these lawsuits would have merit.
Between USD 5 billion and USD 7 billion has been raised by ICOs this year, and now the SEC will go through all these ICOs and decide which ones will be allowed to continue. This might be the beginning of the end for a lot of cryptocurrencies that were sold via ICO to United States citizens. As Concannon forecasts, there could be heavy legal consequences for many cryptocurrency investors, traders, and developers, as well as a significant negative impact on the overall diversity and market cap of the cryptocurrency market.
ICOs won’t be totally banned in the United States; perhaps some will successfully get SEC permission. This would require expenditure for fees and lawyers though, so ICOs will only be feasible for those with significant funding. Even worse, the SEC will be able to manipulate ICOs to change their platforms before granting permission, giving the government strong control over the evolution of blockchain platforms.
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