In the News Today, American regulators are establishing rules and guidelines for ICO releases. The U.S. Securities and Exchange Commission (SEC) wants to clarify how and when new coins may be categorized as assets according to its director of Corporation Finance.
An initial coin offering (ICO) is a means of crowd funding a crypto currency project. In an ICO, some quantity of the crypto currency is sold in a presale to investors in the form of “tokens,” in exchange for fiat currency such as dollars or other crypto currency.
The purpose of these tokens is to provide an investor with a functional unit of currency for future services when the ICO`s funding goal is reached and the product is launched. ICO`s help companies gain funding without giving up shares of the organization. Recently, this environment has been filled with fraudulent behavior and Ponzi schemes but additional regulation can prevent these problems.
The Director of the SEC, William Hinman spoke about their intentions to release clear guided rules to help ICO developers determine on their own whether a potential token can be classified as a security or not. With much uncertainty in the space, the SEC created FinHub, a platform which provides quick feedback on questions about assets and ICO`s.
Until clear rules are in place, it is important to act cautiously when considering to participate in ICO events.