The Securities and Exchange Commission of the United States of America announced the Initial Exchange Offerings on cryptocurrencies are not necessarily completely legal.
Sure they have not put their finger on the specific issues with the regulation or called the act completely illegal, but the notion is already pretty obvious that some additional licensing will be required from now on.
The SEC has not drafted any new regulations or legislation meaning that there is still a full year of relatively free IEO markets, giving crypto exchanges the opportunity to stock up on as many as possible until the SEC figures out how they want to regulate the whole process.
Remembering the ICO days
Initial coin offerings in the United States were a complete disaster in terms of regulations. The SEC was labeling almost all of them as untrustworthy securities speculations that deliberately avoided government regulation.
The commission was up in arms against the crypto industry by the views of most crypto enthusiasts in the states but came around to the idea when STOs and IEOs started to appear on the market.
This was pretty much the same reaction that the CFTC had towards other speculative assets such as Forex and stocks. Once stocks became something of a speculative asset on a massive scale in the United States, both the CFTC and SEC became more and more skeptical about Forex as a direct investment, but according to this eToro Full review were open to the idea of options trading for Forex.
But now it seems that even the options trading similarity on cryptocurrencies is starting to lose popularity with the commission.
Why IEOs are safer
An Initial Exchange Offering is pretty much what it sounds like. A crypto company will contact a local cryptocurrency exchange and pitch their coin to them. It is then the responsibility of the crypto exchange to rate the trustworthiness of the coin as honestly as possible.
If the coin made it on the exchange, it meant that it had the seal of approval, giving it a lot more customers than any ICO would ever have.
The IEO was basically a barrier between fraudulent crypto companies and the consumers, something that the SEC is now working on to regulate.
You see, the crypto companies that make these coins, are already obliged to register them as securities if need be. The IEO simply rates the trustworthiness of the coin and only then lists it on the exchange.
If the SEC is not capable of seeing the security issues during the licensing of the coin as a security, then the IEOs are not what is having the problem here.
All in all, regulating IEOs too much will defeat the purpose and make it even harder for new crypto startups to finally get some exposure through popular platforms.