By David Meyer
March 1, 2018

News of the top U.S. financial regulator probing the growing market for “initial coin offerings” (ICOs) may have briefly knocked the price of Bitcoin, although the cryptocurrency seems to have since recovered.

The news broke Wednesday, highlighting the fact that the Securities and Exchange Commission (SEC) has recently been firing out subpoenas to firms and individuals connected to ICOs that might not be legal. According to CNBC, Bitcoin’s value dipped by 2% on the news, while Ethereum—the network for which is a popular venue for ICO transactions—dropped by an equivalent amount.

The price of Bitcoin has been unusually stable over the last few days, hovering in the $10,000-$11,000 range.

ICOs are a relatively new form of fund-raising where, instead of issuing shares, a startup gives people virtual tokens that can, at some point, supposedly be redeemed for the startup’s services. The issue is that there are loads of these offerings going on, and many may not have an actual business behind them. Even high-profile cryptocurrency industry figures such as Ethereum co-founder Vitalik Buterin have long been warning about scammy ICOs.

According to a Thursday Coindesk report, the SEC’s subpoenas have been “hyper-detailed” to a degree that might be difficult for a startup to parse, although the regulator has also given recipients the option of coming in for a chat.

Subpoena details quoted in that report include “lists of investors, emails, marketing materials, organizational structures, amounts raised, the location of the funds and the people involved and their locations.” Some industry figures quoted by Coindesk questioned whether the SEC’s aim was deterrence or enforcement.

The SEC’s new “Cyber Unit,” which is devoted to ICO regulation, filed its first criminal charges in December, with the target being the issuers of so-called PlexCoins, who reportedly raised $15 million in less than a month.

And in January, SEC chair Jay Clayton warned attorneys involved in ICOs that they may be breaching their professional duties.

The regulator claims jurisdiction over ICOs as it sees the tokens issued in such offerings as securities, giving it the mandate to protect investors.


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