Investment or fraud?
"Investors are having a hard time telling the difference between investments and fraud”, he said, during an appearance on CNBC’s ‘Squawk Box’, which took place on Monday. There has been a steady increase in the amount of exit scams, phishing attacks, and other such deceptions since the ICO boom which began early last year and shows no signs of letting up.
As such, the SEC has been much more proactive in its investigations of ICOs and, indeed, many organizers have been served cease and desist orders, and some are even facing criminal charges.
ICOs are a way that blockchain-based companies can crowdfund their respective projects. Investors donate money, usually in the form of Ether (Ethereum’s native currency) transactions in exchange for tokens.
ICO organizers claim the tokens are to be used within various platforms and ecosystems, described in varying degrees of detail, in their respective whitepapers. However, in reality, so-called platforms are often merely an abstract idea or, in some cases, nothing at all.
As a result, many investors are being conned into blindly investing into shell companies only to be stuck with worthless tokens that they are unable to sell and that have no real-world use.
Understandably, the SEC is eager to clampdown on this sort of activity while allowing genuinely innovative blockchain or cryptocurrency-based projects to flourish.
Because, if no ‘working product’ or, at the very least, a detailed plan of a working product to come, is present, then ICO organizers are really just selling investors unregistered securities which is, of course, against the law.
Indeed, Jackson told the network: "If you want to know what our markets would look like with no securities regulation, what it would look like if the SEC didn't do its job? The answer is the ICO market.”
“Bitcoin [...] full of troubling developments”
Jackson also remarked re Bitcoin: "What I'll say about bitcoin, in general, is that space has been full of troubling developments.”
He added: "We are right now focused on protecting investors who are getting hurt in this market and down the road, we will be thinking about, I think we should be thinking about ways to make those investments work with our securities laws."
It is clear that new regulation is on its way but when exactly it will materialize remains to be seen. Cryptocurrencies and blockchain technology generally is notoriously hard to regulate given its often anonymous and decentralized nature.
However, the SEC appears determined to get a handle on this burgeoning financial market sooner rather than later.