Since the new method of raising money has been very instrumental in setting up of business based on newly invented technology which is Blockchain, it has simultaneously become a luring source for every huckster, scammer, and opportunist who tries to hop on the bandwagon. Yes, we’re talking about “ICOs”.

SEC Commissioner Hester Peirce has given captivating stances in LA today, addressing the challenges of innovation in the financial services sector while providing insight into her philosophy regarding the emerging initial coin offering marketplace and cryptocurrencies in general. She sees an appropriate role for a regulator as being akin to a lifeguard – taking action when necessary but not monitoring the sandcastle builders’ every decision.

The best path forward is for regulators to approach ICOs and tokens with intense curiosity. The US regulator has already warned investors to beware of scammers using ICOs to execute pump and dump schemes wherein these speculators boast up the value of ICOs with a predetermined notion of creating interest and drive the value of coins.

On the flip side, “The regulator should be careful not to try to control the development of new technologies.” Hester Peirce clarifies.

Opportunistic companies are also trying to use the concept of an ICO, turning an innovative method of monetizing an ecosystem into a cheap marketing ploy.

The most frustrating example of this practice are companies who say they are raising capital for an ICO, but in reality, they are just issuing traditional equity or debt securities that are represented by a cryptographic token.

These aren’t ICOs, but rather traditional securities registered (like a transfer agent’s log) over a blockchain. While many believe blockchain securities are the future of securities ownership, a preferred equity token is not an ICO. It is a traditional security that is issued over a blockchain.