SEC Chief: Not All ICOs Are Scams

The SEC's highest-ranking official appears to be softening his stance toward ICOs. At a Princeton University event Thursday, SEC chairman Jay Clayton went so far as to reject the idea that all ICOs are fraudulent, answering "absolutely not" to a question centered on whether his agency's actions against the founders of blockchain projects amounts to such an admission.

The SEC chairman went on to argue that the steps taken by the agency in recent months could actually help the industry mature overall. He told attendees:

"Is the approach taken in Washington by the SEC adversely affecting distributed ledger technology in other areas? My quick answer is that my hope is that it's actually helping - because this technology is being used for fraud and to the extent that it's being used for fraud, history shows that government comes down harshly on that technology later." Clayton continued: "I think if we don't stop the fraudsters, there is a serious risk that the regulatory pendulum - the regulatory actions will be so severe that they will restrict the capacity of this new security."

Elsewhere, Clayton discussed the evolving terminology of the industry. One of the issues with token sales, he remarked, is the attempt to classify them as so-called "utility tokens," which would ostensibly free them from any kind of designation as a security. As such, he reiterated his view that almost all token sales purport to sell such products, despite the fact that they are actually securities. If a startup is "offering something that depends on the efforts of others, it should be regulated as a security," he told. Clayton used an analogy to describe the difference between a utility token and a security token.

"If I have a laundry token for washing my clothes, that's not a security. But if I have a set of 10 laundry tokens and the laundromats are to be developed and those are offered to me as something I can use for the future and I'm buying them because I can sell them to next year's incoming class, that's a security," he explained. "What we find in the regulatory world [is that] the use of a laundry token evolves over time," he continued. "The use can evolve toward or away from a security."

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