The U.S. Securities and Exchange Commission (SEC) is scrutinizing public companies that change their name or business model in a bid to capitalize upon the hype surrounding blockchain technology, SEC Chairman Jay Clayton said on Monday.
Dozens of little-known companies across the globe have seen their share prices leap in recent months after unveiling plans to enter the bitcoin industry or that of its underlying distributed ledger blockchain technology.
In December, the SEC temporarily suspended trading in the shares of Crypto Company (CRCW.PK), a small firm that saw its stock rise more than 2,700 percent after signing a deal to buy a cryptocurrency data platform.
Clayton warned that it was not acceptable for companies without a meaningful track record in the sector to dabble in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures around the risks involved.
“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering,” he told a conference on Monday.
The chairman also said the SEC had seen “disturbing” evidence that legal professionals have been wrongly counseling clients that initial coin offerings, whereby cryptocurrency start-ups solicit funds from investors who receive tokens in return, do not need to comply with federal securities law.
The SEC has previously said that such fundraisings should comply with securities law and has warned investors more broadly over the risks of cryptocurrency fraudsters.
“I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” Clayton said.
South Korea ban
South Korea will ban the use of anonymous bank accounts in cryptocurrency trading from Jan. 30, regulators said on Tuesday in a widely telegraphed move designed to stop virtual coins from being used for money laundering and other crimes.
Local cryptocurrency traders will not be allowed to make deposits into their virtual currency exchange wallets unless the names on their bank accounts matches the account name in cryptocurrency exchanges, Kim Yong-beom, vice chairman of the Financial Services Commission told a news conference in Seoul.
Tuesday’s announcement follows a string of warnings from global policymakers about cryptocurrency trading, including those from South Korea’s chief financial regulator last week who said the government may consider shutting down domestic virtual currency exchanges.
The regulator has previously said it will come up with detailed guidelines for local banks to properly identify its clients by their real names in cryptocurrency transactions.
To make deposits into virtual coin wallets, cryptocurrency traders will need to identify themselves with their real names at the exchange and have those matched with information at local banks by Jan. 30.
According to Bithumb, the country’s second-largest virtual currency exchange, the bitcoin price in South Korea was down 4.35 percent at $12,567 (8,987.34 pounds) from previous day as of 0214 GMT on Tuesday.
Bitcoin is trading up 3.7 percent at $10,750 on the Luxembourg-based Bitstamp exchange.