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U.S. SEC issues first warning against initial exchange offerings

Image by Zach Copley from Flickr

Wed, 15 Jan 2020, 07:33 am UTC

The U.S. Securities and Exchange Commission (SEC) released a statement warning investors against initial exchange offerings (IEOs).

IEOs are among the new developments in the digital asset world. They can be compared to initial coin offerings (ICOs) because both are initial offerings of digital assets that come in the form of coins or tokens. Both are available on online trading platforms for a fee, but investors should take caution because those trading platforms are usually not registered with the SEC and usually refer to themselves as “exchanges.”

“Be cautious if considering an investment in an IEO. Claims of new technologies and financial products, such as those associated with digital asset offerings, and claims that IEOs are vetted by trading platforms, can be used improperly to entice investors with the false promise of high returns in a new investment space. As described, IEOs may be conducted in violation of the federal securities laws and lack many of the investor protections of registered and exempt securities offerings,” the notice read.

The SEC also encouraged the investors to carefully consider if the company and the trading platform involved in IEO have complied with federal securities laws because noncompliance means that they are operating unlawfully. This essentially means that they will lack investor and market protection that the law provides.

Meanwhile, the U.S. Treasury Department is about to finish testing a blockhain-based program that tracks federal grant payments. The program works by converting the electronic federal letters of credit into a digital token. The objective is to make the transaction safe and secure compared to the traditional cash exchange.

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