What Does the DAO SEC Report Mean for ICOs?
September 21, 2017
At the end of July, the U.S. Securities and Exchange Commission (SEC) released their first report to directly address ICOs, sending the crypto world into an uproar. One headline even asked if this was the, “Death of the ICO?” But why does the report matter, and what can we tell now that the initial panic has subsided?
To understand the ramifications of the report, we have to understand the background. Cryptocurrencies, as new technology, were not clearly categorized by the SEC. This meant that for several years, the SEC was quiet about cryptos and ICOs and there were very few regulations imposed on both the groups holding the ICOs and the investors funding them. This in turn meant that ICOs were particularly attractive to small startups without the money or manpower to go through the normal channels. For investors, the process is easier and more rewarding, since they can be involved directly, without the hassle and expense of investment bank intermediaries. (You can read more about what exactly ICOs are here: “What Are ICOs?” )
And then the SEC released the DAO report. This investigative report was in response to the DAO ICO, which lost $50 million worth of crypto in a hack. Their report said that some cryptocurrencies may be considered securities and thereby regulated as such. Still, weeks after, it seems clear that the panic was premature. The report was not definitive or all-encompassing. The SEC made no moves to charge anyone. It seems clear that the report was just a warning. So although the DAO report may have signaled a change, there’s no reason to believe that we’ve heard the ICO’s death knell.