SEC Chief Promises Action on Unregulated Coin Offerings

WASHINGTON (CN) – As crytocurrencies flood mainstream investment circles, financial regulators told Congress on Tuesday that multiple agencies are working together on confronting the emerging industry.

The Securities and Exchange Commission does not have jurisdiction over cryptocurrency trading markets, but the agency considers initial coin offerings as the functional equivalent of initial public offering, SEC Chairman Jay Clayton emphasized this morning.

“ICOs that are securities offerings, we should regulate them like we regulate securities offerings, end of story,” Clayton said, testifying before the Senate Banking, Housing and Urban Affairs Committee.

As in IPOs, investors who participate in a coin offering buy a percentage of virtual currency with the expectation that the currency’s value will go up.

Cryptocurrency companies launch ICOs to raise capital, but Clayton emphasized that none have registered to date with the SEC.

The trouble with this for Clayton is that the parallels to IPOs may fool investors into thinking that they are protected by equal federal oversight.

“To be blunt, if you are trading cryptocurrencies on a platform that looks like a stock exchange, do not take any comfort from that look,” Clayton said.

Denying that Congress need to expand the SEC’s jurisdiction to include virtual-currency markets, Clayton agreed with Senator Elizabeth Warren when the Massachusetts Democrat distilled the import of his testimony.

“Should I take today as you’re sounding a warning bell for people, maybe they better pay a little closer attention to the law or the SEC’s going to pay closer attention to them?” Warren asked.

Because cryptocurrencies have managed to subvert federal disclosure rule for now, Clayton said people trading in cryptocurrencies, such as Bitcoin, are working without all the information available to prospective investors in public companies.

“I don’t think the gatekeepers that we rely on to assist us in making sure our securities laws are followed have done their job,” Clayton said.

Christopher Giancarlo, chairman of the U.S. Commodity Futures Trading Commission, told the committee Tuesday that the government is taking steps to give potential investors more information about the cryptocurrency markets, even without regulatory jurisdiction over the markets.

He said federal agencies have launched podcasts, published websites and scheduled meetings at libraries across the country to help people better understand their investment opportunities.

“We have never done as much work on consumer education as we have done with virtual currency,” Giancarlo said.

Giancarlo urged people curious about entering the virtual-currency market to learn as much as they can to guard against fraudsters looking to take advantage of the open field.

“It’s the same advice I would give my children – if it sounds too good to be true, it is,” Giancarlo said. “If they’re promising ridiculous returns, they’re ridiculous. If you are going to give them money, you better be prepared to lose it.”

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