Over the course of 2017, ICOs (initial coin offerings) have raised a collective U.S. $4 billion. The majority of this growth occurred between the months of June and October alone, when investors poured a cool $3 billion into ICOs and their projects. However, this mania largely subsided by November. The rise of ICOs as a means of venture funding for cryptocurrencies has caught the attention of the SEC and other securities commissions, which are now looking to regulate token sales.
Last year, the SEC ruled that digital coins and tokens from ICOs are considered securities and must be subject to federal securities laws. In particular, because of the 450 million DAO hack which happened last year, the SEC decided to establish a legal definition of coins and "tokens." SEC Chairman Jay Clayton roughly conveyed how the commission intends to approach cryptocurrencies generally, and ICOs specifically, in the future. Initial coin offerings consist of the offer and sale of securities, and directly compromise the securities registration requirements and other investor protections made by federal securities laws. Not all ICOs function like a security, but in the future they will have to either register as a security or prove that they are not classified as such.
With this in mind, it is important that governments find a balance in regulating the crypto ecosystem, so that customers are protected but growth of the crypto ecosystem is not hindered. Clayton holds that such SEC regulations should not be seen as a hindrance to cryptocurrency potential and in fact, he is quite "confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike."
Even in the midst of regulations, the cryptocurrency future looks quite promising. In particular, there are a few factors that have been driving Bitcoin higher this past year. The first of these being growing visibility. Wider mainstream awareness and acceptance as a result of increasing media coverage has greatly benefited cryptocurrency as more and more businesses have started accepting bitcoins as a means of transactions. Another factor which has boosted crypto performance is the announcement of bitcoin futures. This has resulted in surging investor interest as the introduction of futures via CME and CFE will bring legitimacy to cryptocurrencies, and a more regulated environment might be encouraging to investors.
The bubble works like this: as bitcoin prices continue to move higher, they attracts more buyers, and in turn cause new price increases. Many claim that it is only a matter of time before this stops and the bubble bursts; however, with new commissions regulations, this outcome could possibly be prevented (or at least postponed).
- https://www.forbes.com/sites/nikolaikuznetsov/2017/10/10/regulations-to-make-or-break-cryptocurrencies-icos/#5e7c28098a83
- https://themerkle.com/icos-have-now-raised-over-4b-in-2017/
- https://www.forbes.com/sites/cbovaird/2017/12/22/top-5-factors-driving-bitcoin-higher-this-year/#6d4218b361a9
- https://cryptonewsmonitor.com/2017/12/16/icos-have-now-raised-over-4b-in-2017/
