Big changes are coming to the world of cryptocurrencies and blockchain technology after the U.S. Securities and Exchange Commission (SEC) announced that so-called initial coin offerings, or ICOs, may very soon be subject to the same securities laws as other more traditional investment instruments. Depending on how a particular ICO is set up, the SEC explained in a press release, it may be subject to securities laws for the purpose of protecting investors from being taken advantage of by shady companies that might be trying to use the platform to commit crimes.
The SEC issued a comprehensive investigative report that cautioned market participants who engage in the buying and selling of digital assets via “virtual” organizations that some of them will be subject to these new requirements. While some crowdfunding contracts will reportedly be exempt from this classification, including those that register with the SEC and the Financial Industry Regulatory Authority, others will face scrutiny as part of a vetting process.
Some see this latest crackdown as a possible threat to the sustainability of blockchain world, while others agree that increased regulations can help to guard the integrity of the cryptocurrency markets while simultaneously protecting investors against fraud. And while the repercussions of these changes could be a little rough in the beginning stages, advocates argue that the long-term benefits will more than outweigh these necessary growing pains.
“While the SEC’s intention to regulate ICOs will probably have an initial chilling effect on the market as it will make issuance of ICOs more difficult, it will also prove to be a blessing in disguise,” notes Zero Hedge about the changes.
“[It] not only validates the blockchain capital-raising mechanism, allowing the entrance of major banks to use it as a fintech alternative to IPOs, but considering some of the utterly idiotic and doomed to failure ICOs that have been observed in recent weeks, curb the proliferation of ponzi, pyramid and other get rich quick schemes which in many cases are beyond borderline criminal.”
You may be thinking: so what do these new rules mean for popular cryptocurrencies like Bitcoin? While the SEC’s actions imply further regulatory jurisdiction over ICOs and emerging cryptocurrency offerings created for business startup purposes, they will obviously overlap into Bitcoin territory. And this isn’t necessarily a bad thing, as further regulatory oversight even in this more established market means that Bitcoin’s “Wild West” days of extreme volatility could soon be coming to an end.
Once all the kinks are worked out of the system, the plan, at least according to some, will be to grease the wheels for the Bitcoin train to evolve into a more concrete cryptocurrency format. This will mean that extreme up-and-down price volatility could become a thing of the past, ushering in more widespread acceptance of Bitcoin as a valid form of digital currency – potentially making fiat currencies like the Federal Reserve Note completely obsolete.
“Ultimately regulation of ICO will greenlight the eventual use of cryptos as eligible collateral in capital markets transactions, something Bank of America said in a report earlier today is critical to truly unleash the crypto community to its next evolutionary step in replacing fiat,” suggests Zero Hedge.
“Whether cryptocoin enthusiasts like it or not, regulation (and enforcement) will lead to a sturdier blockchain ecosystem, and while the potential for dramatic upward moves will be limited, so will the likelihood of catastrophic losses.” (Related: To keep up with the latest news on Bitcoin and the cryptocurrency evolution, be sure to visit and bookmark Bitcoin.Fetch.news.)
Sources for this article include: