“When considering an offering of digital instruments that involves the use of blockchain technology, whether in the form of tokens, coins or otherwise, there are a number of issues that need to be considered. Much has been written and said recently about Initial Coin Offerings (“ICOs”) and tokens, particularly by the U.S. Securities and Exchange Commission (“SEC”)1– and with good reason. According to some estimates, there was over $4 billion in ICO funding in 2017 alone.
In a statement issued in December 2017, SEC Chairman Jay Clayton provided some information and insight into the SEC’s thoughts and positions regarding ICOs and related securities law compliance concerns, suggesting that, before moving too quickly with such an endeavor, a company ask itself the following questions:
- Is the product that is the subject or result of the ICO legal? Is it subject to regulation, including rules designed to protect investors? Does the product comply with those rules?
- Is the offering legal? Do those who are proposing to offer the product have licenses to do so?
- Are the trading markets fair? Can prices on those markets be manipulated? Can an investor sell when he or she wants to?
- Are there substantial risks of theft or loss, including from hacking?
The answers to these and other important questions often require an in-depth analysis, and may differ depending on many factors.”
1 See https://www.sec.gov/ICO