Amelia Toy Rudolph | Eversheds Sutherland (US) LLP
Cryptocurrencies and initial coin offerings (ICOs) were a recurring area of focus in presentations by multiple divisions of the Securities and Exchange Commission at its annual “The SEC Speaks” conference in Washington, DC on February 23-24, 2018. While the SEC does not seem to have reached consensus yet on how to treat this new, rapidly evolving and volatile segment of the economy, the panelists were clear that significant caution is warranted and that the Commission will apply existing regulatory requirements where the analogy seems appropriate.
Cryptocurrencies such as Bitcoin, Litecoin, and Ethereum purport to be items of inherent value, akin to cash or gold, that are designed to enable purchases, sales, and other transactions, but lack the backing of any government entity. Proponents of cryptocurrencies claim a number of potential benefits from them, including the ability to make transfers without intermediaries and without geographic limitations, finality of settlement, lower transaction costs, and public verification of transactions. Other characteristics of cryptocurrencies that trigger concerns for some are personal anonymity (or, rather, pseudonymity1) and the purported absence of government regulation or oversight, which can make cryptocurrency an attractive vehicle for money laundering and other illicit activity. That said, individual and institutional investors have been intrigued by reports of, for example, Bitcoin values soaring from $900 to almost $20,000 in one year,2 and currently trading at a somewhat more modest $9,500, hence the interest of the SEC and other government agencies in regulating it.3