July 25th marked the one-year anniversary of the SEC releasing a warning to consumers on investing in ICOs and revealing its investigation into the DAO – the first investigation into a blockchain organization of its kind. Zach Fallon, a former SEC lawyer, Principal at blockchain law firm Blakemore Fallon & Co-founder of Ketsal Consulting, reflects on how far the industry has come in the past year.
“There have been at least twenty instances of formal public commentary by the SEC, its Chairman, Commissioners, and staff on digital asset-related matters since the issuance of the DAO Report in July 2017. To say that these issues have been a regulatory priority for the SEC this past year would be an understatement.
“Yet, the vast majority of SEC guidance was in the form of largely basic reminders as to the fundamental reach and application of the federal securities laws. Even the recent remarks by CorpFin’s Dir. Bill Hinman—while incredibly helpful as way to conceptualize issues like decentralization—reinforced, rather than altered, the most basic securities laws concepts.
“The most important takeaway from the past year should be a market-wide appreciation for the fact that the SEC is not going to abdicate its regulatory responsibilities in light of recent technological advancements or the investment opportunities they present. Nor should it.
“This means that the market will now enter into a phase of compliance where securities laws issues and other regulatory concerns are baked into digital asset business models from the get-go, as opposed to grafted in post hoc. And, once regulatory issues are addressed, the potential for distributed ledger technology and any related digital asset will finally begin to be realized.”