Digital Coin Offering Proposals Improving, SEC Official Says (1)

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By Andrew Ramonas

The SEC has seen higher-quality proposals for initial coin offerings as its officials have talked with more regulation-savvy advocates for the digital fundraising tools in the past few months, an agency official said May 23.

Entrepreneurs behind ICOs now often are using regulatory lawyers who can help them have better interactions with the Securities and Exchange Commission, Valerie Szczepanik, head of the SEC’s distributed ledger technology working group, said at the Financial Industry Regulatory Authority’s annual conference in Washington.

The SEC has encouraged ICO backers to reach out to the commission about their projects after the agency released a first-of-its kind investigative report on the fundraising mechanisms last summer. The report concluded that digital tokens issued as part of an ICO could be securities, warning the cryptocurrency community that some of its ideas might violate securities laws.

The commission is doing “a lot of listening” to ICO entrepreneurs, said Szczepanik, an assistant director of the SEC’s Enforcement Division. She said she’s been “very encouraged” by recent developments, including ICO supporters submitting registration statements to the SEC to issue securities using cryptocurrency technology.

“I think the direction this is going in is a good direction,” Szczepanik said.

Clarity for ICOs

But interest in obtaining additional clarity on how securities laws apply to ICOs persists in Congress and among the crypto community.

Rep. Warren Davidson (R-Ohio) said at a May 16 hearing with SEC officials that he intended to introduce ICO legislation that would help clarify cryptocurrencies and securities laws.

Szczepanik didn’t push for changes in laws or regulations in the ICO space at the FINRA conference.

“When the technology is emerging and it’s evolving, you can’t force it in one direction or stifle some other direction that it might go in,” she said.

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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