The SEC boss has publicly admitted for what is perhaps the first time, that ICOs have the potential to exist as an effective fundraising model for startups and other entrepreneurs.
Jay Clayton made the declaration while speaking to the audience at the SEC Progress Review event for 2018. He admitted,
“I believe that ICOs can be effective ways for entrepreneurs and others to raise capital.”
After the positive comment, he spent more time to dwell on the issues facing the funding model and outlined why his agency believes that the Securities law should be enforced on ICO project.
First, he mentioned that the ICO markets do not have the same investor protection measures like other traditional fixed income markets. In his argument, this lack of protection for investors increase the chances of price manipulation and leaves the market as a favorable one for fraudsters.
He also pointed out that it is the same loophole that forced the SEC to keep a close eye on the new industry in 2018 and subsequently clamp down on some ICOs like Paragon and BlockVest. More of such enforcement actions should be expected in 2019 according to Clayton.
Why ICO Issuers Should Abide By Securities Law
In an earlier speech and annual report, the SEC Chairman had labeled nearly all ICOs as Non-Compliant. The top official addressed the issue in his latest speech by suggesting that the ICO market will be less fraudulent and more secure for investors if projects can comply with the regulatory requirements.
Conclusively, Clayton said that the SEC’s recent actions including the formation of a “Finhub” division gives evidence that their “door remains open to those who seek to innovate and raise capital in accordance with the law.”
These comments will perhaps mean a more favorable 2019 for projects that use the modified security tokens offering (STO) fundraising model that complies with the SEC laws.
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