Various US-based government agencies have had a very lenient stance on cryptocurrencies so far. However, over the past few months, this has been changing. While the central government isn’t really going harsh on cryptocurrencies, the watchdog agencies such as Securities and Exchange Commission (SEC) have been investigating into various aspects of the cryptocurrency trade.

The SEC, as well as various states of the US, have been very harsh on cryptocurrency scams and Ponzi companies. A number of cease and desist notices have been sent out to fraudulent platforms over unlawful trade practices. The SEC has also been sending out subpoenas to cryptocurrency investment firms to understand their functioning and to investigate their tax payments. 

However, the biggest target in the crosshairs of the SEC at the moment is that of ICOs. Considering that ICO frauds are on the rise and a number of ICOs are basically running away with investor money, the SEC has now decided to intervene. In a recent statement, the SEC has said that cryptocurrency exchanges which list ICOs deemed by SEC as security tokens are operating as ‘potentially unlawful’ trading platforms.

The SEC statement reads: “If a platform offers to the trade of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.” The SEC Chairman pointed out that while a number of ICOs list their cryptocurrency tokens as ‘utility token’, they are actually security tokens named as utility tokens.

As a part of their investigation, over 80 such ICO operators have been subpoenaed by the SEC. They have been asked to hand over documents related to their token sales and the SEC will go through each of them to judge if they are security tokens or utility tokens. Unregulated security tokens cannot be traded in the US without the approval of the SEC, making it illegal. Exchanges which list these cryptocurrencies on their platform would be guilty by association and would be deemed potentially unlawful because they are helping in trading these illegal tokens. 

US watchdog authorities have been going strict on cryptocurrency related scams over the past few months. Platforms which accept cryptocurrencies form users in return for guaranteed interest such as BitConnect and Davorcoin have been facing cease and desist notices from various states in the country. 

Clayton later commented saying “For some reason, people selling ICOs seem to think they don’t need to follow either path they seem to think they can have the best of both worlds. A limited disclosure from a private placement and public trading and public offering of the token. For a long time, since 1933 that’s not been allowed,” Clayton said. “Although I love this new technology the new technology is not a reason to break down our traditional approach to public and private markets.”