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The recent cryptocurrency market plunge raises questions about Bitcoin’s value and the cryptocurrency market outlook. Regulatory action may have contributed to market jitters. The SEC generally characterizes a token as a “security” when it has a controlling (or “centralized”) entity attempting to provide investors a return. That would put such a token under SEC regulation, potentially subjecting it to sanctions if it hasn’t registered with the SEC.
ICO Quandary – SEC Death Knell?
This quandary applies to most US-based ICOs (Initial Coin Offerings), and may have recently helped depress the cryptocurrency market. The SEC recently settled charges against Airfox and Paragon Coin, the Commission’s first cases imposing civil penalties solely due to ICO securities that neglected to register with the SEC.
Nic Carter, partner at Castle Island Ventures, a venture capital firm investing in blockchain infrastructure and application companies, doesn’t fault the SEC’s actions. In our interview with Carter, he says he believes securities should always be highly regulated. SEC penalties and restrictions, however, represent a potential death knell for many ICOs. Carter thus estimates that only a handful of the larger ICO-based tokens will survive, ones with the clout and robustness to deter an SEC judgement.
The SEC’s Strategy
How will the SEC regulate the hundreds of ICO-based cryptocurrency tokens? Carter thinks the Commission will pick its battles to get the most bang for its buck. He cites the high profile fining of boxer Floyd Mayweather and music promoter DJ Khaled for promoting the ICO of Centra Tech Inc. without revealing that they had received payment for doing so.
Analyzing Cryptocurrency Fundamentals
Assuming it avoids or survives SEC sanctions and restrictions, a token’s fundamentals, says Carter, represent the best indicators of future value.