The chairman of the U.S. Securities and Exchange Commission (SEC) on Monday warned investors of the dangers of putting their money into cryptocurrencies, saying trading and public offerings in the emerging asset class may be in violation of federal securities law.
ICOs allow startups founded on cryptocurrency technologies such as blockchain to quickly raise capital by issuing virtual tokens to investors. Such offerings have become more common in the past year, but little data about them is available because the market has been largely unregulated.
Monday's enforcement action was significant because it showed SEC would step in to address ICOs for registration violations even if there were no claims of fraud, according to SEC officials.
"A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that ... there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation," Clayton said.
He added that many platforms trading in cryptocurrencies may also be in violation of laws that require them to register as an exchange, or an alternative trading platform.
Source: Bloomberg Pro Terminal
Trader Bozhidar Arabadzhiev
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