An investigation conducted by Yahoo Finance and Decrypt Media has found that the United States Securities and Exchange Commission (SEC) has been “putting blockchain startups at risk” with an expanded crackdown on initial coin offerings (ICOs).
Startups are suffering
In the report from Decrypt Media on 10 October, the authors describe the SEC as “exerting pressure” on companies that it issued subpoenas to earlier in 2018 and furthermore, has subpoenaed more, apparently targeting those who failed to sell their tokens “exclusively to accredited investors”.
As a result, companies have been refunding investors and paying fines, many other startups have struggled to meet the requirements of the SEC, describing themselves as being “left in the dark” on how to satisfy the regulatory watchdog.
The battle to classify cryptocurrencies in the US has been an ongoing and tremendously tricky one for those with desires to start a blockchain or cryptocurrency enterprise, and for those who wish to see the industry flourish in the States.
Earlier this year, the SEC stood firm with its decision to classify digital tokens issued via an ICO as securities, a decision that John McAfee spoke out against. Though this classification does not apply to Bitcoin or Ethereum, issuing a token sale in the US is considered arduous if not almost impossible for startups.
As a result, several private entities and organizations in the United States have formed, banded together and begun tackling this notion alongside governmental bodies; both the Chamber of Commerce and the Commodity Futures Trading Commission (CTFC) have called for a sound regulatory environment, one in which blockchain projects can at least be tested in a sandbox similar to that of the United Kingdom.
In July, the Chamber of Digital Commerce (CDC) released a publication that offers itself as a guideline on ‘Understanding Digital Tokens’, written for the benefit and education of policymakers and practitioners. The paper outlines distinct attributes for various types of tokens, placing the blanket token classification of Securities under question.
Industry figures also wrote a letter to the SEC outlining their position on the “intrusive” nature of SEC regulations. The letter claims that the securities classification is causing domestic companies to leave the US in search of greener, more accommodating pastures.
The Blockchain Association was also recently formed to lobby the American government and push for regulatory clarity as well as define best-interests for both the crypto or blockchain industry and the American economy.
According to the report, firms claim that they are unable to communicate with other firms and work out how to handle the matter; and according to a high-profile securities attorney, are supposedly “holding their breath” awaiting new rules from the SEC, but are in no way confident that they will be providing any.
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