SEC chairman Jay Clayton made statements regarding cryptocurrency ICOs during a U.S. Senate hearing on Tuesday. The arena has been a little rocked due to the SEC getting involved in some previous ICOs and sending out stark warnings, leading a lot of projects to start altering their wording in such a way that they could claim they are not subject to securities laws. However, Clayton’s statements paint a very different picture of the landscape.

“I believe every ICO I’ve seen is a security”

This was a strong statement, reinforcing the idea that just rewording what you’re trying to do (like “paying out donations” instead of “profit sharing”) does not negate the issue at hand. It also makes it difficult to tell what an example of an ICO that does not fall under SEC guidelines of being a “security” would be like.

Furthermore, during the meeting, Ohio Senator Sharrod Brown questioned how much of the billions of dollars’ worth of ICOs took place in the U.S., to which Clayton was unable to answer. He chalked it up to the mostly unregulated nature of the ICOs, stating that there is enough that they should be paying attention (and adding in regulations). He further went on to state that it upsets him that people are attempting to skirt private placement rules by operating ICOs, which are essentially the same in how they should be treated. And with the number of recent scams and other problems, regulation has been on a lot of people’s minds.

Is This Good for Crypto?

The general consensus here is that the answer is “yes.” While regulation is something a lot of people dislike, the simple fact is that the government is going to get involved one way or the other. The talk about adding in new regulation and keeping a closer eye on things is monumental, being that this is from the SEC. Why this is important is that they are not denying that cryptocurrency is growing and that it’s an important technological advancement. Much like the Internet, they are actually backing it. Regulating it is a lot better than a ban, in that they are condoning its usage – at least for those who are doing so legally.

What Happens to ICOs?

Being that there have been no legal ICOs yet, this does bring up a great concern with taking part in them. Essentially, there is risk for both the buyers and sellers: sellers risk being charged with securities violations, while buyers risk buying into coins that end up with no value due to the businesses being shut down. As a result of this, it’s more prudent than ever to be careful when buying into new ICOs. It is worth noting that the SEC does not have jurisdiction everywhere, and there are definitely some areas where they can be run legally, but the increasing SEC involvement is more likely than not going to cause a lot of ICOs to start folding as they ramp up investigations.

As a final positive note, Clayton did explain that cryptocurrencies and ICOs are different, going on to state that it’s the ICOs that need to be regulated just like normal securities. Regardless as to how you feel about regulation and crypto, the fact is that most people want security when they are dealing with investments, and the government cracking down on illegal activity will boost the number of investors that would otherwise avoid getting involved. And while they could be unrelated, Bitcoin saw a nice resurgence in price (compared to the dropping we’ve seen) today after the hearing.

For more reading on the SEC chairman’s outlook on cryptocurrencies, you can check out his written testimony here. It’s long, but it gives a lot of insight.