"ICO is an outright and blatant violation of federal laws"

In 2017, start-ups attracted more than $ 3 billion through the initial placement of coins (ICO). Most such procedures pass without control by financial regulators. According to experts, the situation is becoming more dangerous, and ICO is so openly violating laws that regulators need to take urgent measures.

In this regard, the former representative of the Securities and Exchange Commission (SEC), a professor at Stanford University, Joseph Grundfest, spoke. The Expert on Joint Stock Law and Securities Regulation considers the ICO to be a violation of all existing norms and calls on the SEC to introduce restraining measures as soon as possible.

"The ICO is the most popular, blatant and notorious violation of federal securities legislation since the Hammurabi laws," the New York Times quotes Grundfest. The expert also added that the violation became so large-scale and blatant that it already seems comical. According to a former SEC official, the commission should have long imposed restrictions on the activities of companies conducting the initial placement of tokens. However, the number of ICO-companies is only growing.

In July, the US Securities Commission equated some forms of raising funds in the form of tokens to issue securities. Recently, the SEC also warned American celebrities about the responsibility for advertising the initial placement of coins. If actors and athletes promote any ICO projects, but do not disclose the sources and amounts of remuneration for promotion, they can be charged with tax evasion. Moreover, it is forbidden to advertise securities - namely, certain ICOs are equated with them.

Despite these measures, the regulator does not follow the path of China and South Korea and does not introduce a complete ban on the primary placement of tokens. However, as explained by NYT, many companies do not register ICO as securities. Grundfest believes that such cases need to promptly identify and punish violators. Representatives of the regulator are already working on new norms, but the expert believes that the process took too much time. "These are not complicated cases. There is no need for a team of accountants who need to study complex financial records for hours, "Grundfest explained.

At the same time, the former SEC Commissioner recognizes the primary placement of coins as a useful tool, for example, to promote decentralized cloud storage. Tokens in this case will act as a means of payment, and as a tool for entering data into the system. Most ICO projects are not going to produce a viable product, and their tokens are just a means of making a profit. "Most of the projects that we observe today are nonsense," concluded Grundfest.

Many experts compare the ICO with a time bomb. Major regulators also speak of the risks of the initial placement of coins. Recently, the European Organization for Securities and Markets called the ICO "the most risky and speculative mechanism" that could lead to a permanent loss of money.