The U.S. Securities and Exchange Commission (SEC) has just released a long-awaited statement on the regulatory status of digital assets, providing a new unofficial framework for identifying and recognizing potential security tokens/coins.The framework was published by the SEC’s Strategic Hub for Innovation and Financial Technology. Pulling out the key points of the new framework, we found the following;
- Forcefully limiting supply or ensuring scarcity, such as through token burns and buybacks can be considered ‘Reliance on the Efforts of Others’ potentially satisfying a condition of the ‘Howey Test.’
- If a core team is mostly responsible for the development and growth of the digital asset value, so as to present a reasonable expectation of profit for its holders, then the asset may be a security.
- If the digital asset price is solely, or mostly driven by external market forces, then this not usually considered a reasonable expectation of profit.
- If the digital asset was previously a security, but now no longer appears to be one, e.g. if the development efforts of the team no longer leads to a reasonable expectation of profit, then it may need to be re-evaluated.
In Recognition of the FutureIn the release, the SEC states that while it is clear that marketing structures are evolving, those looking to participate in this market must be aware that their activities may fall under its jurisdiction. In particular, the SEC states that with regards to digital assets, entities involved in the following activities may be subject to regulation and oversight:
- Offering, selling or distributing
- Marketing or promoting
- Buying, selling, or trading
- Facilitating exchanges
- Holding or storing
- Offering financial services such as management or advice
- Other professional services
Image courtesy of Shutterstock.
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.