Connect with us


Following SEC crackdown iComply releases ICO, STO compliance research

Tony Zerucha



iComply, a regtech platform for global digital finance and cryptocurrencies, this week released its new research paper The Compliance Trilemma: Challenges for ICOs.

The research was conducted by PhD candidates from the University of British Columbia (UBC), who analyzed the challenges ICO issuers face meeting the regulatory standards for issuing and trading digital assets. This research collaboration was supported by iComply and the Mitacs’s Accelerate Program.

The research examined how the use of blockchain technology allows token issuers to efficiently gain access to global customers, partners, and capital. However – it also identified critical issues relating to the cost-burden of regulation.

“We chose to commission this research to understand how the crypto industry can close the gap between the market and regulators,” iComply CEO Matthew Unger said. “Public blockchains present unique compliance challenges that must be fully addressed before institutional investors can participate in decentralized finance. We are on a mission to build the infrastructure of this new economy.”

The launch of this research follows the SEC’s November 16 Statement on Digital Asset Securities Issuance and Trading that highlighted several recent enforcement actions involving federal securities laws and new technologies.

“…market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain,” the report read in part.

This statement also outlines the enforcement actions taken against AirFox, Paragon, Crypto Asset Management, TokenLot, and EtherDelta’s founder.

“Securities, anti-money laundering (AML), and Bank Secrecy Act (BSA) laws not only protect market integrity, but they also save lives every day by countering the financing of human trafficking and terrorism,” Mr. Unger said. “However, crypto-assets can bypass these laws in seconds – for example, FinCEN’s recent report on $3.8M in bitcoin being used to bypass terrorist financing sanctions is creating massive liability for nearly every exchange and token issuer on the market. While most exchanges, security token platforms, and token issuers are ticking a box when it comes to KYC and AML, we can drive a truck through the holes in their current compliance programs.”

Mr. Unger also predicts the recent SEC orders are only the first of hundreds to come for ICO issuers and the SEC will be followed by proceedings coming from other U.S. organizations including FinCEN, OCC, the Department of Justice, state-level regulators, and class action lawsuits by investors.

“What we offer our clients is a mechanism to adhere to KYC, AML and secondary trade compliance regulations for over 150 jurisdictions,” Mr. Unger said. “This includes compliance for the primary issuance and programmatic compliance for secondary trading using iComply’s patented Prefacto Protocol.

“Since May, we have been pulled into ICO projects, similar to Airfox and Paragon, where the SEC is taking action and are now beginning the remediation proceedings to ensure full compliance rehabilitation for these tokens, many of which must convert to full security tokens as part of their orders.”

Tony Zerucha

Tony Zerucha is an alternative finance journalist with more than seven years experience in the space. The author of more than 1,000 articles, Tony was named LendIt's 2018 Journalist of the Year.

Continue Reading