United States Securities and Exchange Commission
and Initial Coin Offerings
Companies and individual teams are considering initial coin offerings (ICO) as a route to raise capital for their technological innovation. Digital assets coupled with technology behind them may prove to create an new and efficient means for carrying out financial transactions. This approach has raised the attention of the United States Securities and Exchange Commission. Considering how an initial coin offering is mirroring an initial public offering (IPO) in the end result, the United States Securities and Exchange Commission is taking a very close look at all initial coin offerings as securities.
What is a security?
“A security is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly traded corporation (via stock), a creditor relationship with a governmental body or a corporation (represented by owning that entity's bond), or rights to ownership as represented by an option.”
In the Blockchain space initial coin offerings use issued tokens to back up the investment funding provided to the project. The initial coin offering in their white paper should declare what type of token they will provide and how many for the investment and also what type of return of investment this token should represent. This in retrospect to an initial public offering (IPO) and this form of company selling off stock for investment is pretty much the same, but in many facets not the same. With an initial coin offering you are not guaranteed you will receive anything. The main selling point is the potential world wide acceptance of the technology being created for the current investment.
To mitigate the risk of the investor losing his investment to mismanaged projects or total scams the United States Securities and Exchange Commission is looking at tokens as securities and should have the oversight and public disclosure so the accredited or not accredited investor receives a degree of security knowing that the investment has the oversight and regulation the Blockchain markets require to fully flourish.