SEC intensifies scrutiny on ICOs as encryption regulation heats up

Recently, as a cryptocurrency project launched by a social media giant has attracted widespread attention, U.S. regulatory agencies have become increasingly strict in their regulatory stance towards the digital asset sector. Regulatory agencies not only frequently hold hearings but also have intensified investigations and penalties against related companies.

On September 24, the U.S. Congress held a hearing on the regulation of Crypto Assets. During the meeting, the chairman of the Securities and Exchange Commission (SEC) stated that the regulation of Initial Coin Offerings (ICO) remains a challenge, as existing securities laws have failed to effectively address the issue. Currently, the SEC's regulatory approach is still primarily focused on protecting investors. The SEC is seeking broader and more effective regulatory methods.

Another SEC commissioner believes that the SEC's existing rules are indeed lagging behind the development speed of the Crypto Assets industry, and that future SEC rules should be formulated to encourage the development of Crypto Assets and improve industry transparency for investors.

In fact, an increasing number of ICO projects have recently been investigated by the SEC, with a noticeable rise in the number of fines and charges. According to statistics, since August, the SEC has filed lawsuits against multiple companies. These cases involve various fields including ICO project companies, digital asset exchanges, blockchain technology companies, rating companies, etc., with publicly disclosed penalties ranging from $260,000 to $10.24 million.

Here are the 6 cases of Crypto Assets financing charges initiated by the SEC since August:

1. On August 12, the SEC filed a lawsuit against a New York man and his two companies, accusing them of fraud and conducting an unregistered ICO from late 2017 to 2018. The SEC is seeking to freeze approximately $15 million in related assets.

On August 12, the SEC filed a lawsuit against a New England blockchain company, accusing it of issuing approximately $6.3 million in unregistered securities to the public.

3. On August 20, the SEC imposed a fine of $260,000 on a Crypto Assets analysis company for failing to disclose the compensation received from the Crypto Assets projects that received positive ratings.

4. On August 29, the SEC filed a lawsuit against a certain company and its founder, accusing them of deceiving investors through the issuance of securities and operating an unregistered exchange. The company is required to return $13 million in raised funds and pay a civil penalty of $10.24 million.

5. On September 18, the SEC sued a certain company and its founder for violating U.S. securities laws, accusing them of engaging in illegal securities issuance activities as unregistered brokers.

6. On September 23, the SEC charged the CEO of an online adult entertainment platform with manipulating a fraudulent ICO scheme in 2017.

The SEC's stance on Crypto Assets is very clear: digital assets generated from ICOs are considered securities, and therefore, the issuance process must be regulated under securities law. Bitcoin, however, is not generated from an ICO, so it is not considered a security and falls outside the SEC's regulatory scope. However, digital asset ETFs are within the SEC's regulatory jurisdiction. Currently, the SEC requires all ICO projects to comply with existing securities regulations and register accordingly, or they will face severe crackdowns.

Despite the SEC's increased regulatory efforts against illegal financing of Crypto Assets, it has also attempted to open up more channels. In July of this year, the SEC approved two blockchain companies to publicly issue digital assets through Reg A+. According to statistics, as of October 2018, the SEC has approved 39 STO projects.

In fact, the US SEC's tightening of regulations is not an isolated case. As the application of Crypto Assets becomes increasingly widespread, regulatory agencies around the world are becoming more cautious about the encryption field. This is especially true after a certain social media giant announced plans to issue a non-sovereign stablecoin, drawing global attention back to digital currency. This means that a large number of private investment institutions will enter the Crypto Assets sector, leading to a rapid rise of the digital economy, which not only challenges the status of sovereign currencies in various countries but also brings new shocks to the entire financial currency system. This also forces regulators in various countries to accelerate their regulatory layout in the Crypto Assets field.

As the chairman of the SEC mentioned at this hearing, emerging crypto assets projects will attract more people to follow digital assets, especially regulators. Crypto assets, as an investment method that coexists with risks and returns, have characteristics that differ from other securities and payment systems, and their regulatory methods are also different. Since the birth of Bitcoin in 2008, the development of the crypto industry is still in its early stages, and its regulation is still exploring a path filled with controversy and constant revision.