SEC Senior Adviser for Digital Assets and Innovation Valerie A Szczepanik has indicated that in certain circumstances, ICOs may be able to avoid registration requirements.
Speaking in New York at a gathering hosted by the Wall Street Blockchain Alliance, the SEC official has suggested that in certain cases an application doesn’t fit SEC law or regulation “but that it perfectly fits the spirit accomplishing all the goals of investors protection”.
In such cases, a “no-action letter” can be issued to blockchain token projects which recommend no SEC action against the token issuer. Szczepanik explained:
“The letters set forth exactly what the person plans to do or the entity plans to do and if it’s something that the SEC feels comfortable with, we can release a no-action letter for exemptive relief saying “we can recommend no enforcement action”.”
William Hinman, the SEC Director of Corporation Finance maintains that in his view although the Ethereum platform is completely decentralized, it doesn’t currently qualify as a security. New token projects may well have an opportunity to gain SEC registration through the “no action” approach. Szczepanik argues:
“I think that’s a way forward for a lot of people who want to implement some of these things that may not exactly fit in the format of the rules that we want.”
The SEC came under fire in September regarding its current punitive regulations for cryptocurrency, accused again of a lacking a sufficient working knowledge, when a group headed by former Morgan Stanley managing director Caitlin Long and Bitcoin core developer Bryan Bishop, wrote a letter endorsed by prominent experts in the industry.
Referring to the SEC’s current regulations, the letter suggested that bad rules can only serve to damage the burgeoning industry stating:
“Current SEC rules surrounding custody do not reflect the risks inherent in managing digital assets and do not use the technical strengths of the technology. These technical strengths have the potential to lead to a stronger, more robust custody environment.”
The group suggested that the SEC gain insight into the industry by engaging with cryptographic engineers, software developers, Bitcoin exchanges, smart-contract designers, blockchain developers, and existing digital-asset managers.
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