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Distributed ledger technology, also known as the blockchain, is gaining traction globally. Blockchain offers a secure validation mechanism and decentralized mass collaboration. Cryptocurrencies make use of this technology as a new asset class for investors worldwide. Cryptocurrencies are being used by companies to raise capital via initial coin offerings (ICOs). The substantial inflow of unregulated capital into a transactional and transnational industry has aroused interest from not just investors, but also national securities and monetary regulatory agencies. In this paper, we review the Security and Exchange Commission’s initial statements and subsequent pronouncements on ICO’s to illustrate the potential problems with applying an older legal framework to an ever-evolving ecosystem. Recognizing the inability of enforcement within existing regulatory frameworks, we discuss the importance of regulation of the crypto asset class and internal collaboration between government agencies and developers in the establishment of an ecosystem that integrates investor protection and investments.
Cumming et al. (Wed,) studied this question.