Is "The Wild West of Financing" Coming to an End? Cryptocurrency and ICO Risk and Regulation

By: Bianca F. Sena

The startup world may only have a few more moments in the sun when it comes to taking advantage of the unregulated terrain of Initial Coin Offerings (“ICO”). While this type of crowdfunding continues to gain popularity with startups, software developers, and venture capitalists, the evil twin of massive sales – massive losses – may finally bring ICO transactions into the regulatory purview of the Internal Revenue Service (“IRS”), Securities and Exchange Commission (“SEC”), and the Financial Crimes Enforcement Network (“FinCEN”). The SEC may start classifying digital assets, such as Bitcoin, as “financial securities” subject to agency regulation because of their increasing use in Ponzi schemes and fraudulent lending practices. There is also evidence that FinCEN has begun regulating digital assets under various sections of the Bank Secrecy Act (“BSA”). This article explores the increasing awareness of issues surrounding digital assets and reviews developments within each of these agencies that indicate ICOs are likely to soon be regulated….