In what one media outlet is calling the “biggest enforcement move yet” to combat cryptocurrency fraud, the Securities and Exchange Commission (SEC) is reportedly stepping up its crypto crackdown and poised to make moves against dozens over the next year, with the primary focus on the murky world of ICOs.
But at this point, the SEC’s exact game plan isn’t clear, and some have gone as far as to suggest that the regulatory body doesn’t even have the right people to effectively deal with this new digital reality.
In February, the SEC confirmed that it had sent subpoenas to dozens of individuals and companies behind ICOs, while a former SEC lawyer told the New York Times that as many as 80 targets had received subpoenas, describing it as “one of the broader regulatory sweeps” he had seen.
According to Foxbusiness, the SEC has brought as many as nine cases involving cryptocurrency fraud, citing unnamed sources as saying that investigators were working on dozens more.
“Those cases have been trickling out in recent months, but according to securities lawyers a deluge of enforcement actions is expected sometime this year, given the immense caseload under scrutiny,” the outlet said.
Without any concrete numbers and in the face of a lack of clarity from the SEC, no one is quite sure where things stand at this moment—and that’s likely because the learning curve is so steep that neither the SEC itself, nor securities lawyers nor lawmakers have a handle on this.
The regulatory answer is just as cryptic as the currency itself.
“Until they decide to think radically differently about how to regulate financial services, I don’t know how this is going to get resolved so cleanly,” a financial technology lobbyist told The Hill.
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Likewise, Brian Knight, director of Mercatus Center’s financial regulation program, told The Hill: “A lot of our laws are fairly old. They’re fairly dated. The regulators have been sort of writing rules on top of the laws, some of which may make sense, some of which may be outdated themselves.”
And while lawmakers and regulators struggle to protect inexperienced investors from losing their shirts in ICOs scams, others say regulations would just keep lucrative crypto investments for the rich—in other words “accredited investors”.
Zoe Adamovicz, CEO of Germany-based Neufund online equity token-investing platform, recently told Crowdfundinsider that this is a war between Silicon Valley and Wall Street.
“It’s OK for Silicon Valley to do technology, but not OK when they start to do too much finance. Then it’s, ‘Call in the SEC’,” she told the publication. “The US doesn’t want blockchain because it’s the end of Nasdaq…This is killing IPO’s.”
But for the SEC’s new chairman, Jay Clayton, war or not, something has to be done to create a semblance of transparency in the crypto world, and particularly for initial coin offerings, or ICOs.
Last week, Clayton told an audience: “Is the approach taken in Washington by the SEC adversely affecting distributed ledger technology in other areas? My quick answer is that my hope is that it’s actually helping—because this technology is being used for fraud and to the extent that it’s being used for fraud, history shows that government comes down harshly on that technology later.”
By Michael Kern for Safehaven.com
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