Chairman of the US Securities and Exchange Commission (SEC)Jay Clayton has described ICOs as ‘opaque and vulnerable to manipulation,” CoinDesk reported.
Speaking before the Practicing Law Institute's Institute on Securities Regulation in New York, he characterized tokens issued for startup or open-source project fundraising as ripe for misconduct, mentioning them alongside penny stocks and hidden fees on investment products.
“Investors often do not appreciate that ICO insiders and management have access to immediate liquidity, as do larger investors, who may purchase tokens at favorable prices. Trading of tokens on these platforms is susceptible to price manipulation and other fraudulent trading practices," he said.
Clayton also reiterated that cryptocurrency exchanges need to either be registered or get an exemption.
He added that "the Commission will continue to seek clarity for investors on how tokens are listed on these exchanges and the standards for listing; how tokens are valued; and what protections are in place for market integrity and investor protection."
The SEC Chairman described penny stocks and ICOs as "topics that have proven over time to be fertile ground for fraud on investors," though he admitted further policy is needed on the issue.