SEC and the future of ICOs

[abc073]

Hi,

I think everybody is aware by now about the report SEC issued this week, but I believe it can be interpreted in many different ways.
Here is one of them, published by  TheMerkle this morning:
https://themerkle.com/blockchain-ceos-respond-to-secs-cryptocurrency-ico-verdict/

So, I was actually about to start my endeavor with ICOs next week, but now I have serious doubts, so maybe somebody would be kind enough to clear them for me:
1. Is there any easy way to classify which ICOs are, and which are NOT "securities" according to SEC?
2. I assume neither BTC, nor ETH are securities, so they don't need to be registered and regulated by SEC, right? Which other cryptos, if any, fall into this category?
3. What about ICOs restricting participation to non-US citizens? How seriously should this ban be taken? Would SEC be the body responsible for enforcing it, providing the company issuing ICO is based in the US?
4. Can ICO, or pre-ICO participation be truly anonymous? If not, at which stage of the process would the identity of an ICO participant be revealed?

I know it's a lot of question for one post and some of them would probably require some serious guessing, but I will appreciate your feedback.
Thanks!

[Idrisu]

Since I am not citizens of united states of American I don't bother myself with any laws that sec make. If you are not an American also focus on your new project but if you are usa citizen then wait for their laws to be out before you venture into you ICO.

[squatz1]

Since I am not citizens of united states of American I don't bother myself with any laws that sec make. If you are not an American also focus on your new project but if you are usa citizen then wait for their laws to be out before you venture into you ICO.

Well dude, obviously this is going to be what happens.

Moving onto the subject at hand, you're going to have to notice that all these different tokens are going to have to register -- or at least the SEC is going to want them to be registering, this doesn't mean they're going to in the least. This is also something that the market knew was going to happen, and why the market didn't take a huge down trend due to it happening -- they just sat around and accepted it occurring AS EXPECTED.

Also, if these coins aren't structured like the DAO is they have nothing to worry about.

Time will only tell if the SEC will enforce these rules harshly.

[abc073]

This is all great, but still, what would you recommend now to a wannabe ICO investor? Should I just ignore this mess and go ahead with my plans, or rather wait till all regulations are in place and then decide what to do?

[mattinzane@comcast.net]

I have invested in 7 icos and I live in the US, I am not worried about any possible regulation of icos, simply because when the SEC does start to regulate the ones in the US that they say are securities, it will actually legitimize the crypto space. The SEC will have to admit
that Bitcoin and Ether are currencies, how can you buy a security with something that is not a currency? Plus I suspect it will take some time for the Sec to figure out how they are going to apply and enforce the rules and what the rules really are. For now they are just trying to scare new US icos into registering as securities. This is all about money the US government wants their piece of the pie, since this money raising is bypassing the government and they aren't getting any $$ out of it.

However it ends up, you might want to get in on some icos now because the government could ban us citizens from participating in unregistered icos at some time in the future under the guise of protecting the investors. Just like they have tried to do in online gambling. Then only the rich (accredited investors) will be able to invest in icos.

[kolesozw]

IMO if you are US citizen, most safest way is to NOT invest in any ICO. And being part of ICO is completely out of boundaries.

If you are not US citizen, you could invest in as many ICOs as you want. But if you are part of ICO team, being very very careful if you want to visit US. Especially if the ICO colledted a lot of money.

[findingthemoon]

IMO if you are US citizen, most safest way is to NOT invest in any ICO. And being part of ICO is completely out of boundaries.

If you are not US citizen, you could invest in as many ICOs as you want. But if you are part of ICO team, being very very careful if you want to visit US. Especially if the ICO colledted a lot of money.

Most good ICOs already have a disclaimer that US investors are not allowed to invest and those that don't are stupid because putting the disclaimer doesn't stop US citizens from investing anyway but protects the ICO team legally.

US citizens also have nothing to fear from investing as the SEC isn't going to go after the investors, they are going to go after the companies themselves.

It isn't much different from a disclaimer saying invest at your own risk.

[beerlover]

I believe no one could regulate ICOs but this forum can. But as of now crypto industry must need this type of improvement so that a fellow investor may keep their faith for future projects and for bitcoins too.

[HeRetiK]

1. Is there any easy way to classify which ICOs are, and which are NOT "securities" according to SEC?

As a rule of thumb, you can apply the Howey Test:

a transaction is an investment contract if:

1. It is an investment of money
2. There is an expectation of profits from the investment
3. The investment of money is in a common enterprise
4. Any profit comes from the efforts of a promoter or third party

http://consumer.findlaw.com/securities-law/what-is-the-howey-test.html

Since all four points apply to pretty much every ICO, it can be assumed that most ICOs can be classified as securities. In practice the SEC will have to look into each ICO in detail however.

Also note that:

Although the Howey Test uses the term "money," later cases have expanded this to include investments of assets other than money.

Meaning that it doesn't matter whether you used USD, Bitcoin or Ether to buy in.

2. I assume neither BTC, nor ETH are securities, so they don't need to be registered and regulated by SEC, right? Which other cryptos, if any, fall into this category?

Point 3. and 4. of the Howey test arguably don't apply to neither BTC nor ETH, so they are probably not securities as defined by the SEC. Same is true for most other cryptos, but there may be some grey areas.

[abc073]

Thanks a lot!
I think we got some really good answers here, so I feel much more confident now.

What about the anonymity of investing in ICOs?
At which stage of the process can the investor's identity be revealed?
When I transfer ETH, or BTC from an exchange to my ERC-20 wallet my identity will be revealed, right?
If I send ETH to ICO from my wallet and then receive the tokens back to the same wallet my identity remains concealed, right?
When swapping the tokens received from an ICO for ETH, or BTC inside the wallet my identity remains hidden, right?
When transferring ETH, or BTC back from my wallet to an exchange my identity will be revealed, but there is no way to check what was going on with these ETH, or BTC in the meantime.

So, please correct me, if I am wrong, but it seems that the process of investing in ICOs can be kept totally anonymous, right?

[Ponylon]

Hi,

I think everybody is aware by now about the report SEC issued this week, but I believe it can be interpreted in many different ways.
Here is one of them, published by  TheMerkle this morning:
https://themerkle.com/blockchain-ceos-respond-to-secs-cryptocurrency-ico-verdict/

So, I was actually about to start my endeavor with ICOs next week, but now I have serious doubts, so maybe somebody would be kind enough to clear them for me:
1. Is there any easy way to classify which ICOs are, and which are NOT "securities" according to SEC?
2. I assume neither BTC, nor ETH are securities, so they don't need to be registered and regulated by SEC, right? Which other cryptos, if any, fall into this category?
3. What about ICOs restricting participation to non-US citizens? How seriously should this ban be taken? Would SEC be the body responsible for enforcing it, providing the company issuing ICO is based in the US?
4. Can ICO, or pre-ICO participation be truly anonymous? If not, at which stage of the process would the identity of an ICO participant be revealed?

I know it's a lot of question for one post and some of them would probably require some serious guessing, but I will appreciate your feedback.
Thanks!

SEC popping in the scene is not that bad IMO. More regulation will make crypto's more attractive to mainstream investors, because unfortunately it currently has a bad reputation with "no real value". So by regulating it the government itself is partially recongnizing it as a legal security, which is huge! Remember that the government is the main opposition of BTC and therefore concending to regulate (and not ban it) is a huge victory for BTC