What is the difference between an ICO and a cryptocurrency? Well, according to SEC Chairman Jay Clayton, Cryptocurrencies such as Bitcoin (BTC) shouldn’t be considered a security, however, the agency chairman believes that an ICO is a security.
Why is this though? Basically, it comes down to the risk factor: An ICO is considered more of a risk for investors as many of these “coins” may not make to full fruition – meaning the return promised to investors may never happen. It is also well known that many ICO’s are purely fraudulent/scams disguised as legitimate investment opportunities. However, if a coin makes it passed the ICO phase and becomes established – it no longer is a risk in the same manner. It becomes a currency such as USD or Yen, where its value depends on market fluctuations and trends and is the sole risk of the investor – much like the regular stock markets.
Jay Clayton’s remarks have refired a debate over the difference between ICO’s and digital tokens. This is a debate that has already existed over the last few years and once again traders and market participants are showing their concerns.
Source Image: twitter.com[1]
The Chairman says they are not going to change the definition of security, as the U.S. has already built a $19 trillion securities market on the current rules.
“We are not going to do any violence to the traditional definition of a security that has worked for a long time,” Jay Clayton told CNBC on Wednesday. “We’ve been doing this a long time; there’s no need to change the definition.”[2]
Explaining his stance, the SEC chairman says that cryptocurrencies simply “replace” sovereign currencies, including
