SEC Stiffens Crypto Stance, Issues Initial Coin Offering Warning as Next on Chopping Block
The Director of Corporate Finance for the Securities and Exchange Commission announced the entity’s intention to make the classification of cryptocurrencies simpler. The director, William Hinman, spoke at the D.C. Fintech Week conference, speaking on the intention of the company to release some more information to guide exchanges with token offerings.
Hinman explained further, saying,
“We'll elaborate on that in a very plain English way, so ‘do I think I have a security offering,' look at that guidance and you should be able to sort things out.”
The goal of this new information is to allow developers to have enough data on their own to decide if their tokens should be considered a security or not. Even with this speech, there is no indication of when the guidance will be published as a regulation for the industry.
He went on, noting that exchanges are able to ask themselves how to register and how to perform an exempt offering, once they see if they are a security. Some of the issues that the SEC are concerned with are accounting, custody, and token valuation, according to CoinDesk. These issues have been vaguely included in some statements for draft registration already. Hinman added,
“I think we can try to bring that together and share that … we want to share that a little bit more transparently.”
Within the new guidance, there is more information about secondary market transactions, helping to dictate how post-initial offerings will be viewed by the SEC. In these chances, the SEC will also be looking at details like the expected return on investments, as they determine whether a token sale is for securities. He noted,
“If someone's offering an instrument for money or other consideration to a third party, and that third party expects the offer to generate a return or so something that will increase the value of the coin or token or whatever they want to call it, and there's that expectation of return, we're generally going to see that as a securities offering.”
Last year, in July, there was a report published on the DAO by the SEC. The DAO is no longer active, but it used to be a funding vehicle that was founded in Ethereum, using its own token that was later classified as a security. When the Dao was originally examined, the SEC had said that some token sales may have to adhere to securities laws.
From a personal view, Hinman said in June that he does not see ether as a security.