SEC To Regulate Bitcoin ICOs, Token Sales

The Securities and Exchange Commission is getting into the bitcoin market, saying it will regulate the popular digital currency and other cryptocurrencies.

According to a report in Seeking Alpha, the SEC said the cryptocurrencies are subject to federal securities laws. “Offers and sales of digital assets by ‘virtual’ organizations are subject to the requirements of the federal securities laws,” said SEC Chairman Jay Clayton, according to the report. Seeking Alpha noted the regulations apply to companies that use distributed ledger or blockchain technology for things like an initial coin offering or token sales. Those that don’t register their offering could be liable for violation of securities laws, the SEC said. The reason for the regulation, according to the SEC, is “to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection,” noted Seeking Alpha.

The move on the part of the SEC comes at a time when bitcoin is surging and regular investors are taking notice. Last weekend bitcoin investors were in for a wild ride, with the cryptocurrency trading below $3,700 and then an hour later trading around $4,135. This recent bitcoin price surge comes on an all-time high of $3,000 set a week ago. While there’s no one reason why bitcoin surged so much over the weekend, news from TechCrunch pointed to a handful of reasons. For starters, confidence in the virtual currency is increasing after bitcoin went through a so-called hard fork without suffering, and then a few days later it installed a code modification dubbed SegWit that fixes malleability issues as well as enables more transactions to be stored in each blockchain. Because of those confidence-boosting moves, TechCrunch speculated it drove the bitcoin price up over the weekend. Another reason for the cryptocurrency surge, according to TechCrunch, is the initial coin offering (ICO) mania that is taking hold. According to the news report, so far the amount of money that startups have raised via initial coin offerings is more than what a company can raise at an early stage venture capital firm.