According to the Securities and Exchange Commission co-director, Steven Peikin, International cooperation plays an important part in tackling ICO fraud.
On December 3, at Harvard Law School’s Program on International Finance Systems, the co-director discussed the remarkable advancement of ICO market.
He said, “The sponsors of ICOs are, in many instances, located outside the United States, and international cooperation is critical to our ability to investigate and, where appropriate, recommend that the Commission bring enforcement action.”
Since 2016, ICOs have surged drastically, they have spiked 22,000%. He noted that the ICO market has “exploded from a mere concept to a phenomenon” in just a few years.
Increase in the illegal practices related to ICOs has increased rapidly as the funds raised from $100 million in 2016 to more than $22 billion in 2018.
The situation turns difficult for regulators as the fund raised by Initial coin offerings often comes from international investors as well as the investors located in the United States.
Peikin warned that ICOs tagged along with the blockchain technology, make for an enticing factor for investors. Which often affects their judgment and blinds them to the risks linked with the nascent asset class.
Further, He said, “The growth in the ICO market can obscure the fact that these offerings are often high-risk investments, the issuers may lack established track records. They may not have viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings can be simply outright fraud.”
In May 2018, an extensive crackdown named “Operation Crypto Sweep” was launched by the US and Canadian regulators to deal with the menace of cryptocurrency scams and fraudulent initial coin offerings. The Crackdown involved over 70 investigations. Operation Crypto Sweep was a result of widespread fraud among the crypto investments promoters.
Some industry insiders believe the regulatory crackdowns coupled with current bear market have resulted in the downfall of ICO market.
Barry Silbert, the founder of Digital Currency Group, said, “The ICO market is dead – over, you now have the lack of demand from ICOs. And you have all the sponsors of the ICOs who raised a bunch of Bitcoin that are now starting to sell that.”
Although he believes the ICO hype has dropped dead, the founder remains optimistic about the future of the crypto industry. “it is an awkward situation that will pass.”