The Securities and Exchange Commission has served technological companies and their advisers involved in the growing cryptocurrency market with information requests and subpoenas. These sweeping probes will significantly ratchet up the regulatory pressure on the firms turning to ICOs to raise funds. The cryptocurrency sector is a multibillion-dollar market in the USA alone, and the move by the SEC follows a series of warnings from the securities regulator to the financial firms offering ICOs for violating various securities laws.

The SEC is demanding that cryptocurrency firms disclose the pre-sales and sales ICOs structure, since it does not pass through the same rigorous public scrutiny as IPOs. SEC Chairperson Jay Clayton assured that the regulator would increase its scrutiny on the firms looking to capitalize on the promise of an increase in stock value after they announce that they are investing in blockchain technology and cryptocurrencies. So far, the SEC has already shut down various companies, but would not disclose the particular companies, due to unclear associations with crypto business and cryptocurrencies.

Most individuals and companies are attracted to cryptocurrencies due to the light regulation from the government. However, rising concerns about increasing regulatory crackdowns sent bitcoin demand spiraling from a mid-December record high of $19,000 to below $6,000. The SEC is also looking to acquire information of the individuals who invest in ICOs.

Dipping Crypto Business Shares

Following the reports, plummeted the shares of cryptocurrency companies, most significantly the shares of Overstock, a furniture retailer turned Cryptocurrency Company. According to Aaron Kaplan, a securities attorney and co-founder of a startup, Prometheum, that helps investors become SEC compliant said that the subpoenas are the guided missiles SEC uses to enforce regulations. He adds that there will be a big reckoning for individuals and firms found to have operated outside the Federal Securities Laws, and they could be facing stringent SEC enforcement actions and possible criminal prosecutions.

Jay Clayton revealed to the Senate banking committee that no ICOs had registered with the SEC as of February 6th, 2018 although they have been in circulation since 2017. The SEC had on various occasions hinted at a crackdown on ICOs, a relatively new field with little regulation.

It is Not All Groom for Crypto Business

SEC is not the only US federal agency that is looking into cryptocurrencies and crypto business. At the state level, governments are moving to pass legislation aimed at relaxing various controls on crypto business. In Wyoming, the state legislators passed a law exempting ICOs from securities regulation, given that they meet particular requirements. They also have another bill currently being discussed, and it would exempt from property taxes, as is the case under the US tax law.

The Arizona state Senate has passed a bill that authorizes the use of cryptocurrencies in paying state license fees and taxes. Should the bill pass the House of Representatives in Arizona, it will become the first state to accept cryptocurrencies in making payments to the government.

ICOs’ promoters and interested parties say that the law is not clear, but Clayton does not buy their argument. He maintains that the ICOs are being conducted illegally and it is the most probable reason that the SEC has issued subpoenas requiring financial firms to volunteer their information. However, SEC spokesperson has declined to comment on the issue.