Regulating Initial Coin Offerings

“Only the rich” benefit from securities regulation in the cryptocurrency space, said CEO Erik Voorhees in a recent tweet. Voorhees, the head of the cryptocurrency exchange Shapeshift, issued his tweet after messaging startup Telegram’s decision to cancel its initial coin offering (ICO), a new way to raise capital enabled by blockchain technology. According to Voorhees, fear of regulatory scrutiny by the U.S. Securities and Exchange Commission (SEC) drove Telegram to abandon its ICO and opt for private financing instead—taking its capital acquisition out of the purview of securities regulations but also beyond the reach of everyday investors. Syren Johnstone at the University of Hong Kong Faculty of Law echoes Voorhees’s concern, worrying that companies’ concerns that ICOs will be regulated under traditional securities laws may frustrate those laws’ primary purpose. According to Johnstone, the big-picture purpose of the Securities Act of…

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