The U.S. SEC Releases A Framework Providing Guidance on Digital Assets Investments

06. Apr 2019 Posted by Akolkar B on News

At last, after waiting for a long time, the SEC has finally issued an regulatory framework providing guidance for token issuers. The uncertainty in the regulatory measures form the SEC had created an atmosphere of unrest for a majority of the crypto companies to release new tokens in the market.

The new guidance dubbed “Framework for ‘Investment Contract’ Analysis of Digital Assets” aims to classify whether the digital asset can be considered as an investment contract, and thus a security. The latest guidance from the SEC is majorly the work done by Bill Hinman, Director of Division of Corporation Finance and Valerie Szczepanik, Senior Advisor for Digital Assets and Innovation, who are popular called as the “crypto car”.

Note that the guidance should not be mistaken as a rule or regulation in place as the U.S. SEC has neither approved or disapproved its content. However, it certainly gives an idea to crypto business owners how they should realign their plans going further.

The authors of this report stress on the fact that the framework won’t provide any sort of legal advice but instead it is sort of analytical tool for the issuers of ICO tokens. Moreover, it will certainly help to determine whether their token offering falls within the limits of the federal security laws.

The frameworks notes that any sort of communication related to the rules and regulations should be done through the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub).

Furthermore, the framework includes a number of factors to determine whether the token issuers should qualify their offerings as securities or not. These factors include the expectations of profits, whether a group is creating or supporting a market for a digital asset or if a single or at least central group of entities are responsible for specific tasks within the network.

Additionally the announcement notes that “the information contained in this framework may apply to entities conducting the following activities related to digital assets:

  • 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

Although the release of this guidance is just half work done at the moment, it certainly brings some clarity on the thinking of SEC towards digital assets.