The end of the stock market?
IPOs (Initial Public Offerings) are stock floatations. IPOs are extensively regulated all over the world and are subject to strict conditions. These strict regulations are intended to protect the investor, though opinions vary as to whether they do or do not. The real debate is whether many these regulations are truly necessary or whether they simply line their pockets of advisors and bankers at the expense of the investors. Regardless of the legitimacy of these arguments, the plethora of regulations and requirements for stock floatation do exist and must be satisfied.
Regulations are tide around any kind of investment vehicles around the world
The same applies to any other kind of capital and investment brokerage. In nearly all cases, and in all jurisdictions across the world, a license is needed for such a business. That is typically in the form of an expensive bank license, which is likely out of the reach of a group of cryptocurrency enthusiasts—not that they would wish to conform to traditional banking regulations! In any case, crypto projects are usually started by liberal-thinking people who wish to break away from the power of the banks and state regulation. A bank license is the last thing they would want. That is where ICOs come in.
Are ICOs unregulated?
An ICO is a completely different affair because no money changes hands. The only thing exchanged is cryptocurrency, and these are not even qualified or recognized as financial instruments in most countries. For that reason, they should be unaffected by the regulations of the traditional financial markets.
This is a position taken by many. In fact, most authorities are at a loss for how to deal with the whole situation. It is not just different from country to country; even within one country, there can be differing views taken depending on which official, institution, or department you speak to.
In the USA, there are so many state centers and financial monitoring authorities that it would be a miracle if they all agreed. Is Bitcoin a currency or a commodity? Is it an exchange item, a private accounting system, or is it a financial instrument? What about the new belly-draft coin?
Who is the regulator anyways?
Are the stock exchange supervisors responsible for Bitcoin? Or is it the Securities & Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Reserve System (“Fed”), the Federal Deposit Insurance Corporation (FDIC), the Financial Crimes Enforcement Network (FinCEN), the Financial Industry Regulatory Authority (FINRA), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), the Consumer Financial Protection Bureau (CFPB), the National Association of Insurance Commissioners (NAIC), the National Futures Association (NFA)? Or is the responsibility placed on the president himself?
Each institution has its own rules and regulations, along with their own opinion on cryptocurrency and ICOs.
This question becomes especially relevant to an investor if he has invested in an ICO and the ICO is then prohibited. If that happens, what happens to the money they have paid into the ICO?
In late summer 2017, the American Stock Exchange Supervisors (SEC) investigated the DAO ICO of 2016 and established that this constituted an issue of financial instruments. As a result, this ICO should have been subject to the same regulations as an IPO. However, since nobody had actually done that in person, no prosecution would follow.
The sector classified the warning. The SEC is said to have deliberately investigated DAO because the Decentralized Autonomous Organization was not actually a company with conventional structures. It was not structured like a company—it didn’t have a board, officers or shareholders—and therefore could not be treated as one. The SEC could only fire a warning shot and wag a finger so they wouldn’t lose face. Since then the SEC is watching every new ICO like a hawk, and it’s just a matter of time for the DOJ to move in too.
That of course should only be relevant if the ICO is performed under the jurisdiction of the SEO or the DOJ and that will be the focus of our next update. See you in a bit.
Only information, not investment advice This course is not just about the opportunists and rip-off artists that lurk at every turn; it is also about the enormous opportunities that proper ICOs offers to investors. However, it must be stated categorically at this point that this course is only intended to explain and inform. The statements in this course are in no way intended as instructions or advice for investment, nor can they be construed as such. Any investment in an ICO and every purchase and sale of cryptocurrency is undertaken at your own very high risk, and should not be based on any of the statements presented in this course under any circumstances. Do your own due diligence in every instance before you participate in any transaction