Will Initial Exchange Offerings Get Into Trouble With the SEC Soon?

By Rushali Shome

We have recently discussed how Initial Exchange Offerings are becoming the next booming trend in crypto. But, now it seems that the US Securities and Exchange Commission or the SEC is turning it attention to it in a way that may not be too positive.The SEC is anyway not too keen on new crypto trends because of the obvious regulatory issues they portend. Now Valerie Szczepanik, the current Advisor for Digital Assets with the SEC, has commented that companies or entities that are looking to raise funds for their projects by launching IEOs must adhere to existing and applicable regulatory guidelines.

As we have already explained earlier, the IEOs are basically a new way of crowdfunding, considered to be a more advanced version of the existing ICO (Initial Coin Offering) model. Several top crypto exchanges like Binance have shown their support for this model, launching designated platforms such as the Binance Launchpad, for underwriting the public sale of IEO tokens. Although we do not yet know whether IEOs will really be successful or not, we have all been told that the BitFinex IEO has managed to raise whopping 1 billion dollars worth of funding within just ten days of launch.

Szczepanik, while talking about the existing regulatory conditions at the Consensus 2019 Conference recently on the 13th of May, said that whichever companies are planning to undertake IEO launches must remain mindful of relevant regulatory directives in that regard. She warned:

“If they are not registered, they will find themselves in trouble in the US, if they have a US issuer or US buyers, if they are operating on the US market.”

She was very clear on the need to follow regulatory guidelines for everyone: ranging from firms looking to pay listing fees to cryptocurrency exchanges to blockchain startups engaging in broker-dealer situations. The latter type includes companies that are trying to identify buyers for issuers. Szczepanik brought up the example of TokenLot to drive home her point. She said:

“This was a platform that was assisting to bring buyers to ICOs […] In that case, there was an enforcement action charging the platform with acting as a unregistered broker-dealer and participating in the distribution in violation of the registration provisions.”

Rushali Shome

Rushali Shome is a history undergraduate with a keen interest in puns, politics and beyond. When not typing away furiously in the “Notes” section of her phone, she can be found trying to catch the eye of servers at restaurants or weddings for a second helping.

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