This action follows a rise in the number of Initial Coin Offerings, or ICOs, through which crypto-currency startups seek quick financial backing. In 2017, more than USD 1 billion has been raised in such transactions, but there are questions over how investors are to be protected should a venture backed with digital coins fail.
Therefore, issuers of “distributed ledger or blockchain technology-based securities” must register offers and sales. Moreover, regulators do not need to rely on legislation specifically dealing with crypto-currencies to enforce rules on securities and investments.
To support its point on the legal treatment of ICOs, the SEC commented on crypto-currency investment fund known as the DAO, who got hacked in 2016 and digital coins worth USD 60 million at the time were stolen. While the SEC has not decided to make civil charges as a result of its investigation into what happened, it is using the case to caution industry and the market, according to BBC.
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