Securities and Exchange Commission chairman Jay Clayton say that investors should be aware that returns from ICO investments are lower than anticipated. Besides, other risks such as the possibility of tokens being stolen.
Speaking in a statement, he said the markets are prone to great manipulation amidst low regulation and investor protection. He also told market makers that SEC considers cryptocurrencies as securities, noting that no ICO is registered with SEC.
“The SEC also has not to date approved for listing and trading any exchange-traded products. Since holding cryptocurrencies or other assets related to cryptocurrencies”.
He urged investors and traders to take time and read alerts, bulletins, and statements from SEC on ICOs and related investments including those relating to certain offerings and investments by celebrities and other people.
He said a change in the structure of a security does not change the fundamental point. Thus, that security laws must follow when a security is offers. He added that SEC will require ICOs to follow same laws as traditional securities. Likewise, with same procedural, disclosure and registration rules.
“Merely calling a token a ‘utility’ token or structuring it to provide some utility does not prevent the token from being a security”.
It means SEC will not ban ICOs the South Korea and China way but will intervene when a company fails to follow security rules or go loose with them.
SEC has, however, shut down and filed charges against various ICO offers and entities. Internal Revenue Service is also cracking down on tax fraud by demanding customer information from crypto exchanges. The recently charged PlexCoin founders saying they raised their ICOs fraudulently.