Initial coin offerings, or ICOs, have been on the receiving end of much criticism and a growing amount of regulatory scrutiny.
Now the trend may be broadening in the United States, where the U.S. Securities and Exchange Commission (SEC) is seeking what it has called a “balanced approach” in that arena.
Pushing back on that endeavor is U.S. Representative Brad Sherman, a Democrat from California. The congressman believes that ICOs are risky to the U.S. economy.
At a House subcommittee hearing this past week, Sherman stated that the securities markets exist to provide jobs. He said an initial public offering (IPO) fulfills that purpose, but that an ICO only serves to “take money out of the real economy.” Sherman said ICOs should be banned, while William Hinman, who helms the SEC Division of Corporate Finance, asserted that the space continues to evolve.
Speaking of IPOs, lobbyists in the U.S. told lawmakers that rules governing IPO activity should be changed to boost the IPOs that come to market. A whitepaper released on Thursday (April 26) said that regulatory burdens should be reduced for smaller firms. The urging comes from the Securities Industry and Financial Markets Association, Nasdaq and others.
According to the whitepaper, IPOs have become unattractive to businesses. The proof may lie in the fact that IPOs housed in the United States have halved through the past two decades.
Thus, as noted by the paper, some adjustments should be made to the Jumpstart Our Business Startups Act, centering on relaxing some requirements for companies listing an IPO with less than $1 billion in annual sales for at least a decade. In addition, the paper recommends that smaller firms be allowed to issue a press release detailing financial results rather than the standard 10Q report.
Cryptos Debated, as Always
Beyond ICOs, Gary Gensler, former finance head of Hillary Clinton’s 2016 campaign and a recent professor at MIT who recently moved into academia to teach about blockchain, said in an interview with The New York Times that at least two cryptocurrencies — Ethereum and Ripple — have violated securities laws. Bitcoin, conversely, should be exempt from those laws. Gensler believes blockchain has the potential to replace many middlemen that operate in the financial realm.
Looking Toward International Events…
Brexit still continues to dominate at least some financial and economic conversations, according to Duff & Phelps, which lately issued results from its 2018 Global Regulatory Outlook. The findings reveal expectations that London has been named the world’s financial hub for the first time in five years, though that status may waver. Brexit may have an impact, toppling the city from that lofty perch within three years. GDPR will be the top regulatory focus, according to 22 percent of respondents. As many as 95 percent of those surveyed think regulatory costs will see an upswing this year.
Separately, in China, officials have been measuring ways to crack down on what might be perceived as risky lending practices, through efforts by the financial regulator known as the China Banking and Insurance Regulatory Commission. That regulatory body has sent out teams to monitor the lending activity conducted at commercial banks. Of particular scrutiny: consumer lending and real estate lending.