The SEC is promising to get tough on cryptocurrencies — even as it gives them a tacit blessing

The U.S. Securities and Exchange Commission is offering some of its most extensive guidance to investors and Wall Street on how to handle the manic craze surrounding cryptocurrencies — warning traders that digital currency will be policed like old-fashioned currency as it grows more mainstream.

In a 2,300-word statement on Monday, SEC chairman Jay Clayton said that his agency was warily watching the spike in interest, which has led bitcoin to rise to more than $17,000 as of Monday afternoon. But he did give a tacit blessing to initial coin offerings, which have given entrepreneurs a new way to raise money outside of the typical venture capital system.

“I believe that initial coin offerings — whether they represent offerings of securities or not — can be effective ways for entrepreneurs and others to raise funding, including for innovative projects,” Clayton said. “However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.”

Clayton told individual investors to “ask questions and demand clear answers” from crypto-related investments pushed by celebrities, and to “exercise extreme caution” if someone guarantees financial returns.

And in a move closely watched by industry observers, Clayton reiterated that he had no patience for those who argue that the physical token — the object given to investors who participate in an initial coin offering — is not a security, and that ICOs should therefore be exempt from the SEC’s normal securities law.

“By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor-protection provisions of our federal securities laws,” he said. “Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved.”

Clayton promises that his agency will “continue to police this area vigorously.”

This article originally appeared on Recode.net.

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