Blockchain News

SEC May Crack Down on Firms Misusing ‘Blockchain’ Name

One of the surest signs that the blockchain and cryptocurrency industries have reached a certain level of saturation in the minds of the public seems to be the phenomenon of the “blockchain” name. In recent months, some opportunistic companies rebranded themselves in the hopes of capitalizing on the blockchain craze.

In some cases, simply adding the word “blockchain” to the name of an existing (and non-blockchain-related) company had immediate and dramatic results, providing a quick boost to its stock price and fueling investor interest. Going forward, though, the U.S. Securities and Exchange Commission (SEC) will monitor these activities more closely, prohibiting companies from misleading potential investors and the public with a random, gimmicky name change.

‘No Meaningful Track Record’

Speaking at the Securities Regulation Institute this week, SEC Chairman Jay Clayton spoke pointedly about the blockchain name phenomenon.

“I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to 1) start to dabble in blockchain activities, 2) change its name to something like ‘Blockchain-R-Us,’ and 3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved,” Clayton said.

A particular case stands out: a beverage company previously known as Long Island Iced Tea Corp. changed its name to Long Island Blockchain Corp., boosting its stock price sufficiently to avoid being dropped from the Nasdaq exchange in the process, according to Coin Telegraph. (See more: Long Island Iced Tea Soars 280% After Renaming Itself Long Blockchain.)

Name Game Continues

Even this week, alongside Clayton’s remarks, at least one other company has made a similar name change. The UK-based telecoms company, Stapleton Capital,

became “Blockchain Worldwide,” in the process seeing its stock climb by 130%. This boost was short lived but not insignificant, as the end of Monday’s trading saw the gains at 45%. (See also: SEC Blocks Bitcoin ETFs Again; Rejected Winklevoss Bid In 2017.)

Clayton indicated that the SEC plans to “[look] closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.”

Perhaps companies may no longer be allowed to capitalize on the blockchain trend for a quick buck unless they are able to back up their name change with credible attempts to enter the space and provide a meaningful product or service. On the other hand, investors who pour their money into a company with no blockchain experience but a catchy name may still be enticed by other gimmicks in the process. Both individuals and companies alike often hope to make a quick profit off of the new technology, and this seems unlikely to change anytime soon. (See also: Bitcoin Blackmail Scam Is On The Rise.)

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns cryptocurrencies.

Source link

Join The Discussion