U.S. Federal Judge passes regulations mandatory for ICOs


With the immense benefits offered by blockchain technology, the government and regulators world-wide govern the entire system in a fair and transparent manner by introducing certain regulations. Recently the U.S. Federal Judge has passed certain regulations through which U.S. securities laws have to entertain Initial Coin Offerings (ICOs).

Accordingly, to the official source of Bloomberg, the decision just came following a case against “a man charged with promoting digital currencies backed by investments in real estate and diamonds that prosecutors said didn’t exist.”

Maksim Zaslavskiy, a Brooklyn executive, was condemned for executing securities fraud and conspiracy following his participation in two suspicious ICOs. He expected to have claimed that ICOs are not securities but currencies. The defendant tried to get the case dismissed, however, U.S. District Judge Raymond Dearie had made all his efforts unsuccessful saying that “there was no blockchain, no real estate, there were no diamonds.” He further says that “it just wasn’t there. It’s a gossamer. There’s just nothing to it.”

The regulations were introduced in Brooklyn, New York. However, the government can regulate the ICOs related matter under the federal criminal law. As per the valid source of coinschedule.com, ICOs are expected to have generated $18.7 billion in revenue this year. Having said that, the cryptocurrency market also contains worse scenarios like fundraising scams and frauds manipulating investors.

Based on these complexities, the Securities and Exchange Commission (SEC) Chairman Jay Clayton affirms that the entire process must be executed transparently especially when the blockchain and digital assets become the principal activities.

Amid this, Peter Henning, Wayne State University Law Professor said in his interview with Bloomberg, “this ruling affirms the SEC’s position that it has authority over ICOs and that market manipulation and anti-fraud provisions in the law apply.”

At present, the jury handles the case which is expected to draw the same conclusion as Dearie. Let us not forget that the regulations were passed following the Zaslavskiy’s ICOs, but as and when the industry grows up, the same regulations will apply to all future ICOs. Dearie defended his decision by saying that “Simply labeling an investment opportunity as a ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract — a security — into a currency.”

Likewise, initial product offerings (IPOs), initial coin offerings (ICOs) has been a suitable option to raise capital and launch a cryptocurrency project. On the technicality front, the digital assets market let the funds to be pre-allocated and raised even before the development of the project. The capital raised will be utilized for the initial mining process, development, marketing, team building, and ultimately the token ecosystem.

Now that the cryptocurrency market is an unregulated one, the regulatory like SEC always focus to introduce certain rules and regulations that drive ICOs more transparently and ethically. Additionally, Clayton profusely says that all ICOs should register with the SEC and introduce their coins on popular exchanges.

Let’s not forget that the SEC has acquired to streamline the new perspective such that it benefits entire stakeholders involved in the process!!

Shalin Soni

Shalin joined CryptoNewsZ as Associate Finance (Cryptocurrency Research & Analysis) in 2018 and has 10 years of collective experience to work on financial modeling and financial planning & analysis activities (fp&a) domains. He has worked with various organizations in India and added values by leveraging his skills and expertise. He has strong domain expertise in research & analysis, valuation, and fp&a!! You can also mail him at [email protected] to discuss anything related to his reports.
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