Statement on Cryptocurrencies and Initial Coin Offerings
By SEC Chairman Jay Clayton
Dec. 11, 2017
The world’s social media platforms and financial markets are abuzz about cryptocurrencies and “initial coin offerings” (ICOs). There are tales of fortunes made and dreamed to be made. We are hearing the familiar refrain, “this time is different.”
The cryptocurrency and ICO markets have grown rapidly. These markets are local, national and international and include an ever-broadening range of products and participants. They also present investors and other market participants with many questions, some new and some old (but in a new form), including, to list just a few:
Is the product legal? Is it subject to regulation, including rules designed to protect investors? Does the product comply with those rules?
Is the offering legal? Are those offering the product licensed to do so?
Are the trading markets fair? Can prices on those markets be manipulated? Can I sell when I want to?
Are there substantial risks of theft or loss, including from hacking?
The answers to these and other important questions often require an in-depth analysis, and the answers will differ depending on many factors. This statement provides my general views on the cryptocurrency and ICO markets and is directed principally to two groups:
“Main Street” investors, and
Market professionals – including, for example, broker-dealers, investment advisers, exchanges, lawyers, and accountants – whose actions impact Main Street investors.
Considerations for Main Street Investors
A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.
Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies. If any person today tells you otherwise, be especially wary.
We have issued investor alerts, bulletins and statements on initial coin offerings and cryptocurrency-related investments, including with respect to the marketing of certain offerings and investments by celebrities and others. Please take a moment to read them. If you choose to invest in these products, please ask questions and demand clear answers. A list of sample questions that may be helpful is attached.
As with any other type of potential investment, if a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost.
Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds.
To learn more about these markets and their regulation, please read the “Additional Discussion of Cryptocurrencies, ICOs and Securities Regulation” section below.