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PRIMER: cryptocurrency ICO regulation in the US
Trade Journal
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The regulatory reasons as to why issuers are avoiding the US and what is coming next Issuers of initial coin offerings (ICOs) have been avoiding the US for a while, preferring other jurisdictions and their less onerous regulatory frameworks. The number of US regulatory bodies play their part in muddying the waters, but even more confusing is the question of whether an ICO can be classed as anything other than a security. Securities and Exchange Commission (SEC) chairman Jay Clayton has reversed on his initial reluctance that ICOs cannot be anything other than a security. He has recently suggested that an ICO could be something different, which is likely to be satisfying for issuers to hear. Compliance with securities regulation in the same way as an initial public offering is a difficult task for a lot of startup companies and a change could see more ICOs registered in the US. The US has federal and state-by-state oversight. The SEC, the Commodities and Futures Trading Commission (CFTC) and the Internal Revenue Service (IRS) have taken action, but regulation differs widely from state to state. In February this year, Wyoming passed a utility token law, meaning that certain ICOs can be considered a utility rather than a security, providing that they meet certain requirements. The token must not be marketed by the protocol developers as an investment opportunity; the token must be exchangeable for goods or services and the protocol developer cannot have entered into repurchase agreement of any kind or entered into an agreement to locate buyers for the token. At the opposite end of the scale, New York has a very restrictive ICO framework, forcing issuers to obtain the much-maligned bitlicence to operate. Any business that engages in virtual currencies involving the state or investors that reside in the state must...