[Hot Off the Press] SEC Releases Crypto Asset Framework for Token Issuers


US SEC Framework for “Investment Contract” Analysis of Digital Assets

The U.S. Securities and Exchange Commission (SEC) has just published its regulatory guidance for token issuers. The new guidance is related to tokens and it explains how they analyze them to be considered securities or not.

During the last year, the SEC has been taking different measures against Initial Coin Offerings (ICOs) and other crypto-related projects in the market. One of the main concerns that the market has is how to recognize whether a specific digital asset is a security or a utility token or something else entirely.

With this new guidance, the intention is to provide legal clarity about the issues that have concerned enthusiasts, investors and companies in the space for the last few years.

The SEC Director of Corporation Finance, William Hinman, announced back in November, that they were working on a “plain English” guidance for cryptocurrencies. There were other members of the agency that have also provided similar information as Mr. Hinman.

The framework for Initial Coin Offerings released by the SEC explains that investors have to consider whether the U.S. federal securities laws apply.

On the matter, they wrote:

“A digital asset should be analyzed to determine whether it has the characteristics of any product that meets the definition of “security” under the federal securities laws. In this guidance, we provide a framework for analyzing whether a digital asset has the characteristics of one particular type of security – an ‘investment contract.’”

The new guidance explains that the Howey test is not the only form and terms of the instrument itself. Issuers that engage in the marketing, offerings and the sale of digital assets need to analyze the relevant transactions of other offerings to determine if Federal Securities laws apply to their own token.

This aims at providing more clarity to the cryptocurrency space as a whole and to allow firms to understand whether they are launching utility tokens or securities.

If you want to read the full framework, you can read it here or see the document below:

[scribd id=404270833 key=key-5uCcW0uZQPkSDWJ4Dy1j mode=scroll]

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