The SEC Effect: Crypto Investors Feel The Chill
The regulator hasn't forgotten about token sales.
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Markets have taken a turn for the worse as North American investors reacted to the SEC’s latest pronouncements for future token sales. Based on their latest movements, regulators will continue to treat all token sales as likely securities for the foreseeable future.
Markets fell more than $17bn since Wednesday morning. Digital assets across the board are all affected, with Bitcoin (BTC) falling back to four-figures. At the time of writing, BTC was trading at approximately $9,988.
The drop came shortly after the Securities and Exchange Commission announced a fine of $268,000 on Russian crypto analytics firm ICORating, for failure to disclose payments made by projects in order to receive positive reviews. As the SEC classifies ICOs as securities sales, promoters such as ICORating are obligated to disclose any financial compensation received for talking or promoting a project.
That coincides with an F-1 filing from crypto exchange startup INX, which wants to launch a registered IPO for its INX security tokens.
Although there’s nothing controversial in that, it confirms the industry is finally beginning to comply with stipulations first outlined in the 2017 DAO report.
Applications for regulatory approval must navigate through mazes of red-tape, that create additional barriers between tokens and the market. That could reduce the size of the crowdfunding space, and take many token sales out of the reach of retail investors.
This isn’t the first time markets have been affected by U.S. authorities. The meltdown in November came shortly after the SEC ordered two ICO projects to refund investors. Last month, the market fluctuated according to the statements from Congress and the President.
It’s no surprise the SEC has an oversized influence in the cryptocurrency world. But as crypto integrates into mainstream society and governments clarify the rules for digital assets, these unpredictable drops may begin to subside.
There are signs that might already be happening. Robert Cohen, the former head of the SEC’s Cyber Unit announced – also on Tuesday – he was moving into private practice and had already agreed to join the corporate law firm Davis Polk & Wardwell as a partner. Among its clients are several crypto funds, including Coinbase.