February 8th, 2018: In the aftermath of the Senate Banking Committee hearing on cryptocurrencies and other crypto assets, many are watching closely after SEC Chairman Clayton delivered stern warnings for any potential companies releasing initial coin offerings (ICO’s) of their own without first registering with the SEC for official securities offerings.
Federal warnings aside, the city of Berkeley, California is now exploring alternative funding means for the community. One of the possible options, as confirmed by Business Insider, includes the possibility of doing a city issued ICO to raise funds to cover financial concerns where previous funding was lost.
After tax cuts from the Trump administration, Berkeley is in risk of losing federal funding for multiple projects currently already underway, including the development of low-income housing. Couple that with the growing possibility of a heavy funding crackdown on “sanctuary cities” in the new administration and President Trump’s personal remarks about potentially limiting federal funding for the University of California at Berkeley after the Milo Yiannopoulos showdown and you’re left with a city legitimately concerned for its future funding.
A popular way to raise money for projects has been crowdfunding in recent years. Platforms like Kickstarter and GoFundMe have seen significant support and ICO’s are accomplishing the same goal but in a different way. Berkeley on the blockchain? Only time will tell.
The other important question here is what are they offering? While there are plenty of fantastic projects in need of funding, many of the recent ICO’s have raised funds for nonexistent projects or directly fraudulent practices.
To combat this, Berkeley is considering releasing the tokens as another type of pegged cryptocurrency. Instead of offering a token for investors looking for large gains in the future, the tokens will represent ownership of a municipal bond.
Chairman Clayton & the SEC?
One of the interesting aspects of this potential release will be how the Securities and Exchange Commission responds to such an ICO. As mentioned previously, chairman of the SEC, Jay Clayton, issued a stern warning to all potential issuers of tokens that ICO’s have previous fallen into the realm of unregistered securities.
Will this release be different since the tokens are actually functionally acting as representatives for an already-registered government security (municipal bond)? Will Berkeley run into even more roadblocks for funding as the SEC and other federal regulators monitor ICO’s? And if the tokens are acting as registered securities, will Berkeley residents even be allowed to purchase in the offering or will the release be strictly limited to “accredited investors?”