Summary
Much to the chagrin of crypto investors, the price of bitcoin
and other cryptocurrencies fell sharply in the first quarter of
2018, firmly establishing that the laws of gravity apply in
cyberspace. As the cryptocurrency boom of 2017 faded, concerns
about fraudulent fundraising activity grew.1 At the same
time, securities regulators in Canada and the U.S. shifted focus
from simply warning cryptocurrency issuers and exchanges to conduct
their operations in compliance with securities laws, to actively
investigating and, in some cases, intervening in token
distributions.
In the U.S., Securities and Exchange Commission (SEC) Chairman
Jay Clayton has repeatedly expressed his view that most initial
coin offerings (ICO) involve the sale of securities. In
January, he criticized lawyers who give
"equivocal" advice to token issuers that encourage
clients to proceed without regard to securities laws. Mr. Clayton
indicated he instructed SEC staff to be on "high
