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Colorado regulators look beyond the offers of coins for other cryptocurrency frauds

A special task force to investigate the crimes of cryptocurrency will continue after Gerald Rome leaves his post on Friday as a commissioner for the Colorado Securities Division.

The task force, created during the summer, has four staff members investigating potentially fraudulent activities involving cryptocurrency offers. Since then it has expanded its reach into other cryptographic investments.

"Once you spend time on the staff, you start to learn a lot," said Rome, whose office has ordered 18 cryptocurrency offers to cease and desist from May, with two more planned. "We are expanding our approach somewhat: we have identified some hedge funds in Colorado that are investing in cryptocurrencies."

The substitute of Rome, Chris Myklebust, former commissioner for the State Bank and financial services, begins Monday. He said that there is still work to be done to protect consumers from suspicious investments in the guise of initial offers of coins, or Ico.

Chris Myklebust. (Food storage)

"The Commissioner of Rome and I had the opportunity to review and discuss the ICO Task Force and its mission for a long time, and I am confident that, for the moment, the work done is important and necessary," said Myklebust. . "That said, the cryptocurrency space is constantly evolving and changing, and as such, I'm going to keep the division's approach flexible and do the job of protecting Colorado investors where it's needed most."

Cryptocurrency is still a largely unregulated technology, although the US Securities and Exchange Commission has issued several enforcement actions against companies that violate federal securities laws.

The lack of clarity about whether a currency is a security or, like a video game chip, a utility frustrates many in the local blockchain community. As with any new industry, there are the bad guys, but there are also many good startups trying to figure out the right approach, said John Paller, co-founder of ETHDenver, an event for the blocker community of Ethereum.

"No one prevents us from going to the corner shop and investing in Powerball when it costs $ 400 million, I can drop thousands of dollars because I can do it but not invest in the startup that I choose to support," said Paller. "He's finding the balance, regulators should take this innovation that's close to us very seriously."

Yev Muchnik, a corporate lawyer specializing in securities at Denver's Launch Legal, said he had worked with members of the regulatory agencies department. He understands the work of a regulator, but he has defined the system "a bit archaic".

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"While respecting their much-needed role of protectionism within the confines of the law, there is a snowball of technological innovation that challenges how we raise capital, we authenticate information and transactions, which naturally do not fit so firmly into the our series of regulations, "Muchnik said in an email.

His advice for the arrival of Myklebust? Find the balance that does not stifle growth or stimulate an exodus of entrepreneurs out of Colorado or the United States.

Do this, he said, "taking the pulse of the Colorado market by exploring entrepreneurial ideas and initiatives and sitting down with entrepreneurs to understand how they are using blockchain technology to make significant progress in our daily lives."

In an interview, Tuesday, Rome said it created the task force after legislation was introduced by the blockchain community at the start of this year to clarify what makes a token a security or a 39; utility. His staff was not consulted on the change in the securities law, and he opposed it. The proposed law was shortened by one vote.

Initially, the task force aimed to invest in tokens open to Coloradans, although they did not specifically target Coloradans, he said. Some ICOs do not sell to consumers in the United States due to concerns of federal regulators. For the most part, the task force only examined online offers and did not interact with promoters until the cease-and-desist letter was sent.

"You would look at their white paper online and you will see that they promised a 2% profit every day, and we know it's not happening," Rome said. "With the help of the Internet, we found that some of these sites were raising images of other companies, indicating that they were fraudulent, spoofing the HoweyCoins website (a fake website created by the SEC)."

Rome said its agency began paying attention to the cryptocurrency industry after bitcoin, the most popular currency, rose to a spectacular value of $ 20,000 in December. The value of Bitcoin has since declined by 80%, trading Tuesday at around $ 3,800, according to the Coinbase cryptocurrency exchange site.

"Having the excitement of what went high, along with true believers, is just a recipe for people to lose large sums of money if they are not careful," Rome said. "Part of what we did was send warnings to investors, we're out in space and we're finding out that almost everything is fraudulent, so be careful, and I think Chris (Myklebust) agrees with this: our mission is investor protection, we're not just out to catch the bad guys. "

The task force investigations have extended to hedge funds that are investing in questionable cryptographic societies. If the funds do not reveal the risks to investors, they too are circumventing the law.

But Rome, which is retiring, will not be part of any change in the laws of Colorado on securities. He left it to Myklebust, which will continue to work with the Colorado Blockchain Council, a group created by the Gov. John Hickenlooper to understand how to regulate the blockchain community by allowing it to flourish.

"Chris knows we've made a priority with our office," said Rome. "The blockchain council has subgroups and we have assigned staff to the safety law subgroup, which would involve the issue of utility tokens, which posed a big problem for the legislator: doing it through council like this is evolving in the right way because you have a more balanced approach: that product will probably end up in an account at the Statehouse. "

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