Research from a Harris Poll survey commissioned by the National Cryptocurrency Association (NCA) found that “50% of recent crypto offering participants reported losing money during the preceding 12 months. Respondents cited security breaches, abandoned projects, and fraud among the causes. Researchers surveyed 1,004 U.S. cryptocurrency holders between October 5 and October 9, including 401 people who participated in new token offerings.”
SEC Proposed Policy
The Securities and Exchange Commission has a proposed policy that seeks to curb this. Called Regulation Crypto Assets, issuers would have to explain their projects; intended use of funds, and risks. For projects that are larger, financial statements are required. Issuers must provide principles-based narrative disclosures covering:
- Material terms of the covered investment contract and offering.
- Subject crypto asset details, including supply, economics, and governance.
- Management, related persons, conflicts of interest, and development plans.
- Security, source code, ecosystem, and risk factors
Ripple CLO: Push for Greater Transparency
This is what urged Ripple Chief Legal Officer Stuart Alderoty to push for greater transparency and accountability for new crypto offerings. He, and the National Cryptocurrency Association (NCA) raised concerns about consumer protections—raising the issue to the SEC. According to Analytics Insight, “The NCA has asked regulators to require clear disclosures where investors purchase tokens. Its recommendations cover security risks, trading options, and updates when projects experience major changes. The association wants issuers to provide a U.S. address for receiving legal documents. It proposed a public filing-status indicator that investors could use to check whether companies meet reporting requirements.”
Most Agree on Standardizing Information Requirement Frameworks for Crypto
This said, the framework has not yet been implemented; although the proposal by Alderoty and the NCA was submitted on October 20—just as public consultation ended. From the same survey by NCA, 80% of Americans would prefer a standardized information requirement framework for both new and existing cryptocurrency offerings. From the study, public demand is there for better, more transparent consumer protection; although whether this will reduce the statistic of losing money in new cryptocurrencies is something that is yet to be seen.
