The US Securities and Exchanges Commission‘s (SEC) Division of Corporation Finance met on 26 April in order to discuss the development of an approach towards addressing token sales and their classifications.
The SEC has argued in the past that virtual tokens distributed through initial coin offerings (ICOs) should be deemed as securities. This would subject them to strict regulatory practices and effectively affect their price.
A current point of conflict is whether the Ether token, the world’s second largest cryptocurrency after Bitcoin, should continue to be labeled as a security due to its huge decentralization, and thus continue to fall under securities-related laws. According to Coin Center, the two factors that distinguish a non-security token are its usefulness and decentralization.
At the hearing, testimonies were heard from a number of members voicing quite different opinions. Republican Minnesota Representative Tom Emmer led the discussion with SEC division head William Hinman.
Emmer, supporting blockchain innovation, sounded a positive note throughout the hearing, suggesting that regulators assumptions that decentralized networks were only used for fraud and crime bore parallels to early explorers assumptions about Earth.
“People tend to fear what they don’t know. If people sailing the oceans at the time of Columbus had believed the world is flat, we wouldn’t have had the great discoveries of the New World.”
Such comments mark a change in attitude, as the SEC has a had a fairly intractable view regarding both security and utility tokens in the past. SEC chairman Jay Clayton had once reported that he had hoped to see all tokens registered through ICOs classified as securities in the future.
SEC division head William Hinman suggested that the SEC was “meeting with participants that have these ideas of a token that shouldn’t be regulated as a security” and said that he was working with them on how they should be structured. He pointed out that the US wanted to be pragmatic in support of new technology.
Aaron Wright, director of blockchain project Cardozo, suggested on Twitter that the hearing was significant in terms of discussing token regulation, but that there was also “superficial appeal” to treating Bitcoin and related tokens as securities, as many of them were still seen as “speculative assets”.
Non-profit research organization Coin Center was very positive about the hearing, calling the SEC’s views as the “right approach” when it came to examining tokens’ usefulness and the need to differentiate them between utility and security.
The hearing indicated that US leaders have still much to learn about cryptocurrency in order to fill the information gap surrounding the digital currency space.
image source: tom bark – https://pixabay.com/en/bitcoin-dollar-president-washington-2730220