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Securities Registration Requirements Holding Bitcoin Back
By Jason M. Tyra, bitcoinmagazine.com
The commissioner of the Texas State Securities Board issued an emergency order last week barring a private energy exploration company from accepting investments in bitcoin from non-accredited investors. The company, Balanced Energy LLC, allegedly solicited investors at the Texas Bitcoin Conference on March 6th with the statements “we don’t do any verification” and “we’re not the paperwork police,” and informed interested parties that capital contributions in bitcoin would be accepted. No fraudulent behavior was alleged by the Texas State Securities Board in its order, but the company was ordered to furnish potential investors with a disclosure informing them that Bitcoin is volatile and that their investment may be subject to extraordinary risk as a result.
The issue of Bitcoin securities registration has become a major hindrance to Bitcoin startups operating in the United States. The JOBS Act of 2012 would have removed restrictions on unregistered securities offerings over the internet, but has been bogged down by SEC deliberations and is now more than a year late. Though failure to register is not generally a criminal matter, firms that violate the rules can face substantial civil penalties. Combined with tight lending standards and general skepticism about Bitcoin, securities registration has limited fundraising sources for Bitcoin startups almost exclusively to a select few intrepid venture capitalists.
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