Based on a previous report, the SEC released two regulations targeted at increasing the crypto adoption. These regulations make it possible for companies to raise up to 50 million through ICO. The regulations were referred to as the Reg. Crowdfunding (C.F.) and Reg. A regulations.
The SEC’s Regulation Allows to Raise Between $1million – $5 Million
Recently, the SEC made it known that several companies are now taking advantage of the regulations and it expects more companies to follow suit.
It is, however, important to note that any company looking to issue an ICO within the Jurisdictions of the U.S SEC, is required to pass the regulator’s requirement. This is the only way through which any company will be given the approval to raise between $1-5million from an ICO.
A recent report has made it known that one of the most important rules put in place by the US financial watchdog is centred around crypto securities classification. According to the report, it is quite common to find projects claiming to be a ‘ utility token,’ rather than a ‘security token.’ This is usually an attempt by the company to circumvent regulation.
There has been reporting of companies which are genuinely not aware of their token classification. However, this has not prevented the SEC from sanctioning them (ignorance is not an excuse).
Some companies have gone as far as classifying their token in areas the SEC has not made any provision for.
The SEC has the Final Say
Fortunately, the SEC has the power to classify any project into an asset class it fits in. Therefore if a project gets classified by the regulator into an asset class that requires registration and approval, such security will be duly prosecuted for not doing so. At a minimum, the project will be “penalized, required to return funds to investors, and forced to go through precise disclosure and reporting requirements.”
Going by the recent sanctioning of the popular decentralized exchange EtherDelta, and its founder, Zachary Coburn, the regulator has demonstrated that it has the power to punish any entity it considers noncompliant.