In a hearing held Thursday by the Capital Markets, Securities, and Investments Subcommittee of the U.S. House Committee on Financial Services, William Hinman, the Director of the Securities and Exchange Commission’s Division of Corporation Finance, said, “[My] division has also been focusing attention on digital assets and on Initial Coin Offerings. As this area continues to evolve, we are striving for a balanced approach, and one that ensures capital formation while maintaining a strong focus on investor protection.”[1]
This hearing was entitled “Oversight of the SEC’s Division of Corporation Finance,” and one of the central topics of the hearing was the significant decrease in Initial Public Offerings (IPOs) in recent years. Rep. Bill Huizenga (R-Minn.) asked Mr. Hinman if he believed that ICOs could serve as a viable alternative to IPOs, and what the regulatory status of these offerings should be.
Mr. Hinman responded, “The issues around whether a particular coin offering may involve an offering of a security are somewhat complex… an instrument that may be called a coin may still have the hallmarks of a security and need to be regulated as such.”
Rep. Huizenga then asked Mr. Hinman if he could think of an instance in which a coin offering would not constitute the offering of a security, to which Mr. Hinman responded, “In theory, there is a time when a coin may achieve a sort of decentralized utility in the marketplace. There are some coins where you wouldn’t have an issuer to regulate…. In theory, there may be coins where that lack of a central actor would make it difficult to regulate… as a securities offering.”
Rep. Brad Sherman (D-Calif.), infamous in the crypto space for his hostility towards digital assets in a previous
