According to data collated by financial news agency MarketWatch, there was a massive increase in the number of ICOs (Initial Coin Offerings) that were authorized by the US SEC (Securities and Exchange Commission) to sell securities tokens to institutional investors in 2018.
Form D Exemption
MarketWatch stated that it collated the data by searching the SEC’s EDGAR (Electronic Data Gathering, Analysis and Retrieval) system. The agency stated it used keywords such as “ICO”, “token”, “coin”, “saft” and “Initial Coin Offering” for its search.
Based on this research, 287 results were found for 2018 for ICO-related fundraising projects aimed at offering securities that had been accepted by the regulator. These projects we filed under the SEC’s Form D exemption.
Form D is basically a form in which a company briefly discloses critical information for investors for its securities issuance. This form is much shorter than those that are require for non-exempt securities that are being sold to investors. It is also possible to file Form Ds up to 15 days after the initial sale has taken place.
Exempt securities can only be sold to accredited investors, who are individuals who have a net worth of more than $1 million, or have a consistent annual income of more than $200,000, or are enterprises that have more than $5 million in assets.
MarketWatch’s data showed that these 287 ICOs that were registered in 2018 under the Form D exemption has a total declared value of more than $8.7 billion. In contrast, 2017 saw 44 ICOs registered under the Form D exemption, reaching a combined value of $2.1 billion.
This means that the increase in ICO registrations under Form D exemptions went up by over 550% last year. Additionally, the total combined value of ICOs registered this way went up by 314%.
Lack of Clarity on Crypto Classification
The classification status of cryptocurrencies has been a thorny problem for some time now. And this is mostly due to the overlapping jurisdictions of multiple government regulatory bodies.
Earlier this week, US Congressman Soto from Florida state had proposed that most cryptos should actually be regulated by the CFTC (Commodity and Futures Trading Commission) or the FTC (Federal Trade Commission) and not the SEC (Securities and Exchange Commission).
Soto argued that the SEC’s securities laws could be very “intense” and this could harm more than help the nascent crypto market.
From within the industry, Goldman Sachs backed crypto finance startup Circle’s Chief Executive Officer and co-founder Jeremy Allaire stated that greater clarity over the definition of cryptos could unlock massive market activity and also enable the growth of crypto-based securities.