The US Securities and Exchange Commission (SEC) said Tuesday that Initial Coin Offerings (ICOs) should be considered to be subject to the same rules required in traditional securities sales, according to The Star.
There is currently no regulatory oversight for ICOs, a means of crowdfunding for blockchain technology companies. There are currently 110 ICOs in the works, according to tokendat.io.
The SEC's decision is part of an investigation into a virtual organization known as The DAO. The DAO allowed anyone to contribute ethereum tokens to be a voting member and have an equity stake in the organization, but later came under investigation after a hacker moved $60 million of the tokens into a separate account.
Start-up fund-raising, also known as Initial Coin Offerings or ICOs, are similar to an IPO and are currently one of the main applications of blockchain technology.
The SEC's opinion serves as a notice to companies using ICOs that they need to play by the rules in this country. In addition to The DAO, there have been several other instances of companies using ICOs in questionable ways, and critics say some of the businesses attempting to launch under an ICO lack credibility.
Though the ICO space has seen huge growth this year, some businesses will steer clear, at least until its reputation improves. Regulation could alleviate some of those concerns.