PROVIDENCE – Massachusetts regulators are taking a hard stance on the policing of initial coin offerings in the Bay State.
William F. Galvin, secretary of the commonwealth, announced this month his Securities Division would begin a sweep of Massachusetts-based entities that are raising money via initial coin offerings.
“Blockchain may or may not change the way banks transfer money or the way credit payments are made, but there is little question that the offer and sale of digital coins are securities which need to be registered or exempt from registration in the commonwealth,” Galvin said.
Initial coin offerings, or ICOs, are a means of raising money by selling tradable digital coins or “tokens.”
The interest stems largely from the excitement surrounding the cryptocurrency bitcoin and the blockchain technology that supports it. Blockchain is a decentralized public ledger of bitcoin transactions. Supporters predict it will transform all industries, but especially financial services.
The high level of interest surrounding the system, however, is making it a prime target for scam artists, Galvin warned.
“With the current frenzy over bitcoin and all the accompanying hype, ICOs are fodder for scam artists trying to capitalize on the craze,” he said.
Fraudulent ICOs have yielded regulatory enforcement from the U.S. Securities and Exchange Commission. China has outright banned them. Galvin said he sees states as playing a role.
“No one regulator can police this marketplace,” he said. “My Securities Division intends to patrol these offerings to proactively prevent investor harm.”
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.
