The Chairman of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, has reiterated his position that ICOs are securities, adding that he doesn’t know how much more clear he can be.
He made this statement at the public forum held by SEC yesterday June 13, “Investing in America: Atlanta Town Hall Meeting.” The town hall meeting attracted a lot of attention due to the number of regulators that would be speaking about cryptocurrency regulations and innovation.
At the event, regulators assured the people that the commission is looking to welcome any innovation with blockchain technology, even though SEC is still very careful in terms of fraud, as they have a duty to protect retail and individual investors. The commission also reiterated its stance on ICOs, affirming that they are considered as securities even though they didn’t mention any coin or token.
The agency confirmed that as the investment world continues to grow, they are also improving their own data and technology in a bid to keep up with latest trends and improve market security. Kara Stein, Commissioner of the SEC, while talking at the forum stated;
Cryptocurrency has the potential to reduce the cost of investing. It could decrease the cost of capital allocation. We are being challenged, we are being disrupted like everybody else is… and one of the things we’re thinking about is how to embrace the innovation and make sure it’s used effectively. One thing we are thinking through is how to ideally anticipate and prevent problems before they arise.
She further siad;
I think remaining competitive requires, both us as regulators and market participants, to thoughtfully evolve with the innovation and not react to it after the fact. For example, there are increased risks for pump and dumps and Ponzi schemes, perhaps, because it’s so easy to now invest in that hotel resort community in some African nation.
Clayton maintains his position
Jay Clayton, who many consider being an apologist for blockchain, stated that his position hasn’t changed and he sees a lot of potential in the blockchain technology. He admitted that the regulations that were used to build the U.S. equities markets are very much applicable to the cryptocurrency market and he “expects them to be followed.”
Blockchain technology has incredible promise for securities and other industries. I think we all can agree on that… It greatly reduces transactions costs, including the costs of verification. It’s a powerful technology… That technology, people have used to apply to fundraising… we’ve had pretty clear…rules on how to conduct fundraising when you’re offering securities. Much of what I have seen in the ICO or token or ICO space, is a security offering… I don’t know how much more clear I can be about it.
This is similar to what he said last week. Clayton during an interview with CNBC stated that he believes that Bitcoin isn’t a security but ICOs are. He made this known when talking about the huge potential of the distributed ledger technology. Regarding Bitcoin, he stated;
Replace the dollar, the yen, the euro with Bitcoin. That type of currency is not a security.
He, however, sees ICOs as securities, as he defines securities thus;
Where I give you my money and you go off and make a venture and in return for me giving you my money, you say, ‘You know what, I’m going to give you a return.’ That is a security, and we regulate that. We regulate the offering of that security, and we regulate the trading of that security.
He added that the commission isn’t willing to change the definition of securities in order to support the ICO industry, claiming that they are not going to do any violence to the traditional definition of a security which has worked well for a long time.
Tether and Bitfinex manipulate market
SEC and the CFTC might soon be looking into Tether and Bitfinex after a research paper released by John M. Griffin and Amin Shams of the University of Texas suggests that the transaction patterns and printing of new Tether tokens were done to provide price support for Bitcoin and manipulate the cryptocurrency market.
The research claimed that half of the price of Bitcoin which reached close to the $20,000 mark last year was explicitly due to Tether and issuer, Bitfinex. The abstract of the paper stated;
Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices.
The paper further added
Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.
Tether and Bitfinex are already under investigation from US regulators regarding the true value of Tether as claimed by the company, with this latest study to put more pressure on Tether and the issuing company, Bitfinex.
Many traders and investors have doubted the claims by Tether, a stablecoin that is pegged to the US dollars. The company claimed that every USDT is pegged to 1 USD, with the token recently becoming the 12th largest cryptocurrency in terms of trading volume. This has led to more traders doubting if they really have all those cash stored as they claim.
The study led to another spark in the cryptocurrency world that saw the Bitcoin price drop further to the $6,300 region, with many traders on social media platforms like Telegram and Reddit, expecting the price to dip even lower over the next few hours.