Initial Coin Offerings May Be Subject to US Securities Laws, Says SEC

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Initial Coin Offerings May Be Subject to US Securities Laws, Says SEC

In the release, the SEC explained that its inquiry focused on a 2016 offering known as "The DAO", which was built atop the Ethereum blockchain-a popular form of distributed ledger software. The goal of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors protection.

The agency's guidance took the form of a report on a German group known as The DAO, for decentralized autonomous organization, that used blockchain technology to raise about $150 million a year ago.

ICOs have become a bonanza for digital currency entrepreneurs, allowing them to raise millions quickly by creating and selling digital "tokens" with no regulatory oversight.

The fact that in the weeks and months following May 28, 2016, among the many tens of thousands of transactions made for DOA Tokens, many were made by USA citizens could have prompted the SEC to look into the matter.

The Securities and Exchange Commission (SEC) has informed market participants that Initial Coin Offerings (ICOs) are subject to the same requirements of the federal securities laws as traditional securities sales. Whether the assets are purchased with dollars or virtual currency does not have any bearing.

The Report of Investigation recently published by the SEC underlines the necessity to register offers and sales of distributed ledger or blockchain technology-based securities as well as securities exchanges providing for trading in these securities unless they are subject to exempt. They apply both to traditional companies or decentralized autonomous organizations, to securities purchased using USA dollars or virtual currencies, to securities distributed in certificated form or through distributed ledger technology.

Although the SEC said it.

In its release on Tuesday, the SEC added that it would not bring charges against those involved "given the facts and circumstances". The federal securities laws provide disclosure requirements and other important protections of which investors should be aware.

Steven Peikin, co-director of the Enforcement Division, said in the statement: "As the evolution of technology continues to influence how businesses operate and raise capital, market participants must remain cognizant of the application of the federal securities laws".

American cryptocurrency investors who complained about how many ICOs (Initial Coin Offerings) exclude them from participating are going to be really disappointed from now on.

The SEC has made this decision after an investigation of The DAO case for violation of securities laws with unregistered offers and sales of DAO Tokens in exchange for "Ether". The bulletin can be found here.

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