The Securities and Exchange Commission (SEC) has now launched a formal probe into the cryptocurrency trade and business in the United States. This report comes via the Wall Street Journal, which states that the SEC has sent out a number of subpoenas and information requests to companies and individuals dealing in cryptocurrencies. These investigations are being carried out by the enforcement division of the SEC.

The SEC has sent out subpoenas asking primarily for structure for sales and pre-sales for ICOs. The SEC has been expressing concerns about these firms ever since cryptocurrency prices hit an all-time high of $19,000+ in mid-December. The SEC has been acting as a silent watchdog so far - but has now started taking actions. The United States has been quite lenient on businesses and individuals dealing with cryptocurrencies so far, but it now appears that a crackdown may soon follow on money laundering and illegal businesses as well.

SEC Chairman Jay Clayton had stated in the past that there will be investigations from the SEC into those dealing with large volumes of cryptocurrencies. It appears that this is the direct impact of his statement and the crackdown has begun. The SEC’s target here is to curb out all the players which are involved into ICO scams and ponzi schemes. 

“[W]e are open to exploring with Congress, as well as with our federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate. We also are supportive of regulatory and policy efforts to bring clarity and fairness to this space,” Clayton said in a prepared testimony.

In the past too, a number of US States and the SEC have been working together to curb out such fraudulent firms. The likes of Bitconnect, Davorcoin and more recently, LeadInvest were forced to shut down operations in certain states. It is expected that this SEC probe would result in the discovery of more such companies which victimize and manipulate investors with fraudulent promises and false disclosures. 

ICOs are the primary target in this probe. As per data from Token Report, over 1.7 Billion USD have been raised from ICOs alone this year. Telegram alone managed to raise $850 Million via their ICO and a series of private sales. Interestingly, a report from E&Y states that 10% of total ICO funds raised last year have been stolen! ICOs are an easy target for fraudsters and cybercriminals. This SEC probe and subsequent crackdowns might help reduce these incidents.

The SEC has been issuing these warnings for quite some time now. In the past, the SEC had stated that classifying cryptocurrencies as a ‘utility token’ to circumvent laws is not fair. While cryptocurrency exchanges do not fall under the jurisdiction of bodies such as CFTC and are governed by state laws, the SEC is now targeting ICOs. After successfully curbing out a number of fraud cryptocurrency platforms, it appears that 2018 will be a year fraudulent ICOs vanish from the markets!