Former chairman of the U.S. Commodity Futures Trading Commission (CFTC), Gary Gensler said that most tokens sold through Initial Coin Offerings (ICOs) should be classified as securities.
When asked whether blockchain technology should be regulated, Gensler asserted that “we should be technology-neutral.” He continued, stressing the necessity to ensure investor protection within certain blockchain applications, such as cryptocurrencies. Gensler said:
“I think that cryptocurrencies like Bitcoin (BTC) need more protection and probably more protection than even the oil markets.”
Should cryptocurrencies be considered securities, they would fall under the regulatory purview of the U.S. Securities and Exchange Commission (SEC) Issuers of coins would have to comply with certain laws, register with the SEC, and disclose specific information like a description of the organization’s properties or financial statements.
Speaking at a U.S. SEC and CFTC senate hearing in February, SEC chairman Jay Clayton said that while every ICO token the SEC has seen so far is a security, a distinction should be made between tokens and major digital currencies such as BTC and Ethereum. The definition of ETH as a security has reportedly been questionable.
Clayton issued a public statement, concluding that most tokens sold in ICOs are likely securities under U.S. law. Clayton then noted that the content of the transaction is more important than the form in determining if an investment is a security.