The Securities and Exchange Commission is not trying to undermine the potential benefits of cryptocurrencies but instead is trying to raise awareness that many promoters of bitcoin and other coins and tokens might be running afoul of securities laws, SEC Chairman Jay Clayton said Monday.
"These warnings are not an effort to undermine the fostering of innovation through our capital markets – America was built on the ingenuity, vision and spirit of entrepreneurs who tackled old and new problems in new, innovative ways," Clayton said in testimony prepared for a Senate Banking Committee hearing on virtual currencies scheduled for Tuesday.
Instead, he said, he and other regulators have been warning investors to think twice about putting money into cryptocurrencies or "initial coin offerings" because they might run afoul of U.S. securities laws and lack protections.
The "ability of bad actors to commit age-old frauds with new technologies" combined with a frenzy of investment into cryptocurrencies have raised the SEC's fears about investors getting ripped off and defrauded, Clayton said.
He noted in particular that some companies marketing themselves as cryptocurrency "exchanges" are not exchanges as regulated by his agency and that investors could be deceived into thinking that they have regulatory protections. The agency is open to working with Congress and the states to explore further regulation of the companies, he said.
Clayton also explained that a coin or token marketed as a currency is not necessarily one, and instead could be a security. That determination will be made on a case-by-case basis.
