Regulators Warn Cryptocurrency Start-Up Fundraisers to Play by the Rules

Cryptocurrency was invented by people who didn’t much like regulators, but red tape can still bind the technology that enables it: blockchains. Fresh proof comes from a pronouncement from the Securities and Exchange Commission late Tuesday. It said that regulations applying to investments such as stocks also apply to some initial coin offerings, a novel approach to fundraising that startups have used to draw in more than $1 billion this year.

Described simply, an ICO sounds like a childish money-making scheme. A person, project or company in need of capital creates a new kind of digital coin and sells a tranche of them for real money. Magic! The coins are created using the same kind of technology behind cryptocurrencies, such as Bitcoin or Ethereum, and usually paid for using digital currency, not dollars.