Initial coin offerings (ICOs) may provide early-stage startups with an effective way to raise capital and build a dedicated base of followers, but the head of one of the world’s largest stock exchanges believes that they’re harmful to retail investors.
Nasdaq CEO Adena Friedman levied this criticism on Wednesday at the Future of Fintech conference in New York, arguing that investors like “Auntie Mae in Iowa” are being taken in by the hype surrounding these projects.
“To make it no rules at all, when companies can just willy-nilly take people’s money and offer no information at all, with no governance, that sounds to me like you’re taking advantage of people.”
“I sympathize with SEC saying these are really securities offerings,” she added, according to CNBC ’s report on the conference. “I support the SEC on that.”
As CCN.com reported, the SEC has stated that select cryptocurrencies, including bitcoin and ethereum — do not fall under the agency’s purview and should instead be treated as commodities. However, officials have said that most ICOs and many other cryptoassets should be treated as unregistered securities.
Friedman said that she is concerned about the lack of transparency in the ICO industry, as startups rarely submit to the same times of disclosure requirements placed on companies raising capital through initial public offerings (IPOs).
“In ICO space none of that is available, and it’s all being bought by retail,” she said. “I have real concern on lack of transparency, oversight, and accountability that these companies have as they’re going out to raise capital through an ICO.”
While critical of ICOs, Friedman’s comments on cryptocurrencies as a wider asset class have been much more optimistic. In addition to theorizing that cryptocurrency is the “right next step” in the development of currency, she has said that Nasdaq is not adverse to becoming a cryptocurrency exchange at some point in the future.
Nasdaq has also licensed its platform surveillance technology to Gemini, a New York-based cryptocurrency exchange founded by Tyler and Cameron Winklevoss.
Nevertheless, Friedman’s not quite sold on this nascent asset class, and she said that Nasdaq won’t consider listing cryptocurrencies until the market is more mature.
“We have to assume this is something that could become something really interesting and a real layer of the internet,” she said. “It could also die on the vine and become the Beanie Baby phenomenon.” The “jury’s still out,” she concluded.
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