SEC To Regulate Bitcoin And Friends

One of the “advantages” of cryptocurrencies touted by their supporters is their independence from any government or regulation. Maybe so. Until now. Last week the SEC announced that they will begin regulating the sale of Bitcoin and other crypts like DAO coins. “They are subject to Federal Securities laws”.

“Offers and sales of digital assets by ‘virtual’ organizations are subject to the requirements of the federal securities laws” said SEC Chairman Jay Clayton. The regulations apply to entities that use distributed ledger or blockchain technology, as in, ”Initial Coin Offerings" or "Token Sales.” Unregistered offerings will be liable for violation of federal securities laws.

The purpose, says the SEC, is to “ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors' protection.”

Note that the SEC is under high budget scrutiny, so its reach needs to be expanded so as to preserve its budget. Also, the budget is supported by fines and penalties for violations, which the SEC has found 226 times in the first 6 months this year (highest 6 months ever).

Still, "Investors need the essential facts behind any investment opportunity so they can make fully informed decisions, and today's Report confirms that sponsors of offerings conducted through the use of distributed ledger or blockchain technology must comply with the securities laws," said William Hinman, Director of the Division of Corporation Finance.” Hmm….

Apparently, the SEC investigation stems from an agency inquiry into unregistered offers and sales of DAO Tokens in exchange for "Ether," (another virtual currency).