J. Christopher Giancarlo, chairman of the U.S. Commodity Futures Trading Commission (CFTC), and Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), provided testimony on February 6 to the Senate Banking Committee about the risks associated with virtual currencies for investors and the financial system.

“Virtual currencies … likely require more attentive regulatory oversight in key areas, especially to the extent that retail investors are attracted to this space,” Giancarlo said.

A lack of regulatory oversight of the markets, as well as the fact that “many” ICOs are being conducted illegally are two problems “worth particular attention,” said Chairman Clayton.

He went on to warn the ICO market that “those who engage in semantic gymnastics or elaborate structuring exercises in an effort to avoid having a coin be a security are squarely within the crosshairs of our enforcement division.”

Senator Elizabeth Warren spoke to ICOs, as well. “Some ICOs raise money for legitimate companies, but others, we know, are just Ponzi schemes.”

She and SEC Chairman Clayton discussed generally how ICOs could be made safer, and how “not one” ICO had registered with the Commission. Senator Warren asked why no one had registered.

Clayton responded that the “gatekeepers [the SEC] rely on…have not done their jobs.”

He elaborated on the topic in general: “What ICOs do is take the disclosure-like benefits of a private placement and then add to it general solicitation and promise to the investor of a secondary market without registering to us.”

Chairman Clayton holds a view that might send chills down the spines of those in the ICO market.

“I believe every ICO I’ve seen is a security,” he said.

There is a solution, however.

Securities on the Blockchain

As the SEC, CFTC and U.S. Senate discussed blockchain technology and its regulatory implications, Polymath quietly introduced Polymath-core and Polymath.js; a groundbreaking new protocol to help start the securities token revolution.

Polymath creates an interface between financial securities and the blockchain, simplifying the process for issuers to overcome the complex technical and legal challenges of a successful token launch. This was covered by the blockchain publication CCN in their article about our securities token platform.

Over the next few years, stocks and share certificates will migrate from transfer agents and clearinghouses to the blockchain. Indeed, NASDAQ, the Bank of Canada, and Bank of England and many others have spoken on how blockchains and distributed ledgers might transform the securities industry.

Polymath dramatically lowers the barriers to entry for businesses looking to launch regulatory compliant, tokenized securities on the blockchain and for investors looking to gain exposure to regulated, asset-backed tokens.

With tokenized securities that have KYC baked-in, that exist on a transparent, digital ledger, Polymath could offer regulators deeper insights into securities markets than available for the traditional securities markets of today.

Let the stampede begin…

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