As the regulatory bodies in the United States are working on creating a unified framework for ICO regulations, the latest hearing at the US House of Representatives saw Congressmen locking horns with the SEC official about their views on the considerations of ICOs.
The hearing entitled “Oversight of the SEC’s Division of Corporation Finance” took place last week on Thursday, April 26, where Mr. William Hinman, Director, Division of Corporation Finance, U.S. Securities and Exchange Commission said that there should be “balanced approach” in regulating Initial Coin Offerings (ICOs).
Hinman also said that as the sector of virtual digital currencies and ICOs continue to develop, “We are striving for a balanced approach, and one that ensures capital formation while maintaining a strong focus on investor protection.”
The hearing was carried with one of the purposes being the discussion on the declining number of Initial Public Offerings (IPOs) in the country. Congressmen Bill Huizenga, member of the House Financial Services Committee asked Hinman if ICOs could be a reason for this decline and whether they must be regulated.
Responding to this, Hinman said: “in theory, there is a time when a coin may achieve a decentralized utility in the marketplace, or […] there may be coins where that lack of a central actor may make it difficult to regulate.”
Hinman seemed to draw the same line-of-though as that of his boss and SEC chairman Jay Clayton who thinks that ICOs need to be regarded as securities.
However, another Congressmen Brad Sherman (D-Calif.) countered Hinman on his views and was quite assertive in a way that ICOs are detrimental to the long-term health of the economy. Sherman said: “The reason for securities markets is to provide jobs in the real economy. An IPO [initial public offering] does that, an ICO does the opposite.”
He also further added that “It takes money out of the real economy, it takes people willing to invest and risk, and says ‘don’t use that ability to risk, don’t use those animal spirits to help create a job for a person who needs one, let alone build a factory for thousands, sit there and trade back and forth in the ICO.”
Sherman further asked why ICOs haven’t been “stopped” and trying to maintain any sort of “balance” as suggested by Hinman can’t further affect the economy negatively.
“When you strike a balance between those who are trying to create a new currency to facilitate drugs, tax evasion, to deprive the Fed of its ability to market our securities and return 100 bln dollars or so to the US Treasury, all the balances are for total investor protection, which could be achieved by totally banning,” said Sherman.
Well, it looks like some more regulatory discussion will further take place in order to have an absolute clarity on the state of ICOs and arriving at a unanimous decision for the same.
Earlier this year in February, SEC and CFTC reached to a conclusion where the classified blockchain (DLT) to have least regulatory oversight, ICOs to have the highest and digital currencies falling in between these two.
