ICO Exam Sweep Launched in Massachusetts

By Melanie Waddell

December 15, 2017 at 07:43 AM

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Just days after releasing a list of warnings about Bitcoin, Massachusetts Securities Regulator William Galvin said Friday that he's starting an exam sweep of entities based in the Commonwealth raising money from initial coin offerings.

ICOs are used to raise capital by selling digital coins or tokens that can then be traded, and the digital coins or tokens represent an interest in a company.

ICO issuers are primarily tech companies offering a blockchain-supported technology.

The Massachusetts Securities Division notes that a blockchain is "a continuously growing decentralized public ledger of transactions," which many say will revolutionize the financial services industry.

"Blockchain may or may not change the way banks transfer money or the way credit payments are made, but there is little question that the offer and sale of the digital coins are securities which need to be registered or exempt from registration in the Commonwealth," Galvin said in a statement announcing the sweep.

"Also, with the current frenzy over Bitcoin and all the accompanying hype, ICOs are fodder for scam artists trying to capitalize on the craze."

ICOs were banned in China in September, and the Securities and Exchange Commission also recently issued a warning about the cryptocurrency market.

"No one regulator can police this marketplace," Galvin said. "My Securities Division intends to patrol these offerings to proactively prevent investor harm."

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