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SEC examines cryptocurrency and ICO risks

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Peter Terlato
Posted: 7 February 2018 5:09 pm
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Coin offerings will be examined to ensure traders receive adequate risk disclosures for crypto deals.

The Securities and Exchange Commission’s (SEC) compliance department highlighted the need to carefully monitor risks associated with the emerging cryptocurrency industry and initial coin offerings (ICOs) in 2018.

The SECs Office of Compliance Inspections and Examinations (OCIE) published its annual list of priorities this week, after SEC chairman Jay Clayton fielded questions concerning the oversight role of U.S. regulators with regards to virtual currencies at an open session Senate Committee hearing in Washington D.C. yesterday.

“Of particular interest this year will be matters involving critical market infrastructure, duties to retail investors, and developments in cryptocurrency, initial coin offerings, and secondary market trading,” OCIE said.

OCIE plans to monitor the growth of digital currencies and ICOs, while examining registrants involved in offers and sales to ensure investors receive adequate disclosures about the risks associated with these investments.

This strategy may reveal answers to some of the questions posed by the Senate Committee during the hearing on Tuesday – in particular queries put forward by Senator Jack Reed concerning financial systemic risks.

“Are you tracking all these different daily emerging currencies?” Reed asked U.S. regulators during the hearing.
“Is someone looking long term at the systemic effects? Where are we going to be?”

Commodity Futures Trading Commission (CFTC) chairman J. Christopher Giancarlo told Reed that, “right now, this [crypto] is still a relatively small market, just by ratio, but… we have to watch it and watch it carefully”.

SEC chairman Jay Clayton agreed with Giancarlo’s assessment but was quick to warn the Senate Committee that “if people are getting ripped off, that represents reputational risks, which can have systemic effects”.

The two chairmen revealed the SEC’s plans to “devote a significant portion of resources” to surveying and investigating the unseasoned and controversial coin offering marketplace in a WSJ op-ed in late January.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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