Initial Coin Offerings (ICOs) started to take advantage of U.S. Securities and Exchange Commission (SEC) regulations implemented in 2015. The regulations Reg. Crowdfunding (C.F.) and Reg. A, allow companies to raise funds between $1 and $50 million dollars, according to a report from CryptoSlate.
ICOs Could Raise Up To $50 Million Dollars
The Initial Coin Offering market has exploded between 2017 and 2018. There were hundreds of new projects gathering funds to start different blockchain and crypto-related platforms. However, there are several projects that tried to avoid being regulated claiming that they offered a utility token rather than a security token.
This situation has created several virtual currencies that are located in a grey area without a clear definition. Nevertheless, these ICOs could be penalized in the future. Moreover, there are some unregistered securities that the SEC did not control yet.
If there is a project that is considered a security and it did not register as such it will be penalized. This project will have to register as a security, return investors’ funds and pay a fine, among other things.
Back at the beginning of the month, the SEC announced enforcement actions against two ICOs: Paragon and AirFox. Both of them were considered as projects selling unregistered securities. This is why they will have to pay for a fine and return investors the funds they have invested.
Nonetheless, there are two additions to the fundraising regulations. The Regulation Crowdfunding (C.F.) and Regulation A(+). These two new additions were added to the Securities Act of 1933. These regulations allow projects to raise funds between $1 and $50 million dollars without having to run an IPO. IPOs are very costly to run and allow only a few investors to participate from it.
These regulations started to have an impact just recently, even when they were implemented three years ago. According to CryptoSlate, just 30 companies were registered as broker-dealers or funding portals.
This could allow for new investors to start placing their funds in ICOs. Investors’ confidence and compliance could be enhanced by applying these set of regulations.
Carlos is an international relations’ analyst specializing in cryptocurrencies and blockchain technology. Since 2017, Carlos has written extensively for UseTheBitcoin and other leading cryptocurrency sites; with over 2,000 articles published.