Originally published by the Los Angeles and San Francisco Daily Journal
Virtual currencies bitcoin, etherium and others have gained significant notoriety, intriguing entrepreneurs and established businesses alike and prompting a wave of innovation particularly in the financial services industries, aka FinTech. Now, government regulators and enforcement agencies are not only taking notice, but taking steps to assert their jurisdiction and curb abuses.
Blockchain, the technology underlying bitcoin and most virtual currencies, has been lauded and criticized for its ability to offer relatively fast, inexpensive and nearly anonymous trans- actions. While blockchain technology has ushered in a new era of FinTech innovation, its rapid rise in popularity for raising investment funds has also drawn attention from several U.S. governmental agencies. Case in point: The U.S. Securities and Exchange Com- mission, which is charged with over- seeing the U.S. securities markets.
Back on July 25, the SEC took particular notice of the white hot market for initial coin offerings, or ICOs, in which companies sell digital tokens or coins to raise money for various "projects." In particular, the SEC issued a "report of investigation" that found that digital tokens offered and sold by a "virtual" organization known as "The DAO" were securities and therefore subject to the federal securities laws."
The report cautions market participants that offers and sales of digital tokens or coins may be subject to the requirements of the federal securities laws. According to a senior SEC enforcement official, "The innovative technology behind these virtual trans- actions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets."
Download >> SEC Files First ICO Enforcement Action
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