Initial coin offerings that give consumers stake in a company should be regulated as a security; those offering early access to product or service should not
TORONTO, July 27, 2017 /CNW/ - Equibit Group, a world leader in blockchain technology and applications for the global securities industry, today applauded the U.S. Securities and Exchange Commission's ("SEC") most recent ruling, which states that the sale of certain digital assets through an initial coin offering ("ICO") are subject to the requirements of federal securities law.
As emphasized by the SEC, the act of distributing equity to the general public through blockchain technology or distributed legers, is at its core no different than an Initial Public Offering ("IPO"), and should therefore be regulated accordingly. However, by calling these instances ICOs, certain organizations have effectively misappropriated the term - even if they are offering debt obligations through an equity-based token.
"IPOs that are masquerading as initial coin offerings have become a serious issue to those that are committed to the future of cryptocurrency, and we're happy to see the SEC take these initial steps to clear up confusion between the two," said Chris Horlacher, Chief Executive Officer of Equibit Group. "A true initial coin offering is a source of crowdfunding in support of a product or service, and should therefore not be held to the same rules and regulations as a security. Purchasers are not receiving a part of the issuing company any more than they would when pre-ordering a book from Amazon."
By definition, a true ICO represents the sale or pre-sale of a company's product or solution through the use of utility tokens. These tokens grant purchasers the ability to use a decentralized network for the exchange of value, and do not represent the sale of financial interest in a company. The value of tokens purchased in a true ICO is in early access to the product or service, and does not reflect an ownership stake for the purchaser.
Greg Medcraft, current Chairman of the Australian Securities and Investments Commission and former chairman of the International Organization of Securities Commission, recently stated that initial coin offerings will remain largely outside the purview of global regulators, emphasizing that many do not possess the characteristics of a traditional security. It is Equibit Group's hope that prominent security regulators follow the SEC's thorough approach and continue to make similar informed decisions based on understanding of important distinctions, and encourage innovation within the financial landscape.
"As the blockchain industry continues to evolve, it is our hope that regulators in Canada and across the globe embrace this innovative technology and encourage its use, while at the same time recognizing the unique differences between true ICOs and IPOs being mislabeled as such," added Horlacher. "With the full support of regulatory bodies, blockchain technology will not only help to minimize error and increase security around the transmission and collection of crucial information, but also bolster efficiencies within a number of critical sectors, including financial."
This year, Equibit Group held its first-ever presale of utility tokens, called Equibits. Through this true ICO, customers were able to buy a key part of Equibit Group's core software, effectively an exclusive and transferable software license devoid of any stake within the company.
About Equibit Group
Equibit Group is applying blockchain technology to establish the world's first peer-to-peer equity and debt marketplace. In much the same way Bitcoin applied digital technology to currency and payments, Equibit eliminates the need for expensive infrastructure and third-party facilitation from depositories or transfer agents. Registration, transfer, settlement and investor relations will all be managed securely and digitally within a decentralized environment. Founded by a former CFO from the securities industry and a team of blockchain development experts, Equibit Group was established to revolutionize the securities industry.
SOURCE Equibit Group
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