The U.S. Securities and Exchange Commission (SEC) has yet to show its hand regarding potential oversight of bitcoin, other cryptocurrencies, and initial coin offerings (ICOs).
Speaking at an accounting conference on Monday, SEC Chairman Jay Clayton stated that the commission believes that, under federal securities laws, there is “very little distinction” between “handing people a piece of paper that says ‘stock’” and asking investors to put money in bitcoin and ICOs, according to a Wall Street Journal report.
The report notes that Clayton stopped short of stating that the commission is planning to issue formal guidance on cryptocurrency and ICOs, but he did issue a stern warning to brokers that they must abide by KYC/AML regulations, no matter how bitcoin is classified.
“Your responsibilities on knowing your customer are the same as if someone shows up and plunks a bag of cash on your desk,” Mr. Clayton said.
Clayton and other SEC officials have been eying the cryptocurrency ecosystem with concern for some time. In September, SEC Co-Director Steven Peikin stated that whenever an asset or technology becomes the subject of industry hype, “roaches kind of crawl out of the woodwork and try to scam money off of investors.”
Indeed, the commission has already begun to step up enforcement of securities laws within the cryptocurrency ecosystem. Monday morning, the SEC announced that it had filed charges against the operators of PlexCoin, an ICO that allegedly defrauded investors by promising returns of more than 1,300 percent in less than a month.
The PlexCoin charges are the first brought as a result of an investigation conducted by the SEC’s new Cyber Unit, a task force which launched in September to combat a range of threats, including misconduct perpetrated through ICOs and other schemes involving blockchain technology. Clayton hinted that it will not be the last.
“As long as they ignore the securities laws, they’ll see more actions,” he said.
Significantly, Clayton’s comments come just days before the first bitcoin futures contracts begin trading on a regulated U.S. exchange. The launch of this product is expected to trigger a flurry of applications to create a Bitcoin ETF — applications that the SEC will broad authority to approve or reject.
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Last modified: May 20, 2020 9:17 PM