The issue of Initial Coin Offering (ICO) has continued to elicit a lot of reactions from stakeholders and shareholders. Recently, there was a hot debate between House Financial Services Committee members and US Securities and Exchange Commission (SEC) official. This happened during the hearing US House of Representatives on Thursday, April 26 where the members from both sides disagreed on whether to adopt a balanced approach when regulating ICOs.
During the hearing, the director of the SEC’s Division of Corporation Finance, William Hinman, described digital assets as being in continuous evolution and therefore a balanced approach was more appropriate where the focus was on capital formation while maintaining a strong focus on investor protection.
The hearing was called to discuss the declining number of Initial Public Offers (IPOs) in the country. Bill Huizenga, the committee member, requested Hinman to explain whether ICOs would offer a solution and whether these ICOs required regulation.
Hinman explained that there are times where a coin is likely to achieve a decentralized utility in the marketplace. He also added that there are times when a coin’s lack of a centralized actor makes it difficult to regulate. Hinman went on to explain that SEC was consulting those issuing tokens to find out if the offerings were either regulated or not qualified as securities.
Another committee member, Brad Sherman, sharply disagreed with Hinman, saying that ICOs cannot replace IPOs since the latter creates jobs in the ‘real economy’ while the former simply constricts those opportunities by removing money from the economy.
Sherman wondered why these ICOs had not been stopped, considering the ‘negative’ effects they had on the economy. His approach would be to totally ban the ICOs. He said that scammers preferred these decentralized enterprises.
From the meeting held between SEC and the Commodity Futures Trading Commission (CFTC), there was the conclusion that ICOs require some level of regulation.