Silicon Valley VCs: The SEC Needs to Soft Pedal on ICO Regulation
In recent times bad actors have taken advantage of the largely unregulated nature of the entire digital currency industry to lance their scam. Amidst this backdrop, the United States Securities and Exchange Commission (SEC) has not been taking these attempts lightly. However, some heavy-hitting VC firms in Silicon Valley have urged the regulatory watchdog to soften its harsh grip on ICOs.
Watchdogs, Sledgehammers, and the SEC
According to the Wall Street Journal, representatives from the California-based Venture capital firm Andreessen Horowitz and Union Square Ventures engaged top SEC officials in a serious discussion on March 28, 2018.
Included in the discussions were reputable legal luminaries from Cooley LLP, Perkins Coie LLP, and McDermott Will & Emery LLP. The formidable team asked the agency’s Division of Corporation Finance to give them concrete assurance that the SEC would not wield its sledgehammer on ICO projects in which they’ve invested.
Both VC firms have long been die-hard crypto investors, pumping a substantial amount of money into blockchain and digital currency-based firms including Coinbase, OpenBazaar, Polychain Capital as well as several credible ICOs.
It’s worthy of note that both firms also contributed immensely to the success of the recently concluded CryptoKitties fundraiser.
Categorize Some ICO Tokens as Utilities
On April 6, 2018, the chairman of the SEC, Jay Clayton defended the commission’s strict oversight on ICOs and crypto-related businesses, stating that the entire activity of the regulatory watchdog is in a bid to strengthen the digital currencies industry.
“I think if we don’t stop the fraudsters, there is a serious risk [of a] regulatory pendulum – the regulatory actions will be so severe that they will restrict the capacity of this new security,” he said
While the chairman admitted recently that not all ICOs are scam schemes, he does categorize almost all the ICO generated tokens as securities of which must be registered with the SEC. Clayton furthered:
“For example, a token that represents a participation interest in a book-of-the-month club may not implicate our securities laws, and may well be an efficient way for the club’s operators to fund the future acquisition of books and facilitate the distribution of those books to token holders.”
“In Contrast, many token offerings appear to have gone beyond this construct and are more analogous to interests in a yet-to-be-built publishing house with the authors, books and distribution networks all to come,” he added.
Notably, Andreessen and USV have urged the regulatory watchdog to add more ICOs to the class of utility tokens, which do not constitute investments and therefore won’t be shut down by the SEC.
According to sources close to the matter, the agency may not offer a broad regulatory exemption as requested by the VC’s but officials may exempt projects that cap contributions and prohibit token holders from reselling tokens at a profit.
Most forward thinkers in the world, including IMF chairperson Christina Lagarde, have already woken up to the fact that blockchain and cryptos will revolutionize the world. As such, there’s a need for favorable regulation to eliminate criminals from the cryptosphere.
At current, there seems to be a renewed confidence in the entire digital currency markets. The bulls are gradually taking charge as the price of bitcoin comfortably sits at $8,541 at press time.
