SEC Could Likely Bring Some Flexibility in Cryptocurrency Token Offerings

According to one of the agency officials at the U.S. Securities and Exchange Commission (SEC), the regulatory agency could likely consider some relaxation for new token offerings in the cryptocurrency market. Upon pursuing the no-action letter from the SEC, some blockchain projects could be allowed to bypass SEC’s registration requirements, the official said.

Valerie A. Szczepanik, the senior advisor for digital assets and innovation to the SEC, was speaking at an even hosted by the Wall Street Blockchain Alliance on Thursday, December 13.

“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,” said Szczepanik. She further added that token issuers are usually given three options. This includes registering themselves as securities offerings, applying for exemption or making sure they aren’t a security.

However, Szczepanik adds that the SEC can decide upon that “maybe this doesn’t fit the letter of our law or regulation but it fits the spirit and we can accomplish all the goals of investor protection.” In such rare circumstances, the SEC can issue a no-action letter wherein the agency staff can recommend the SEC to not initiate an enforcement action against the 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.'”

She adds that some projects might have already been considered by the SEC under its new FinHub initiative. “In this space, I think there is room for people to come in and we have had folks coming in either on a confidential basis or with proposals,” she said.

Furthermore, Szczepanik adds that the classification of a token as a security is based on how its sale if structured. She adds that circumstances where a token is not classified as securities will be rare. Her thoughts resembled in line with the SEC chairman Jay Clayton who said that fundraising through the token selling process should be done with the assumption that “it is a security”.

Szczepanik says that the SEC is not willing to create roadblocks or stifle innovation in the FinTech space. However, its primary focus remains investor protection. She further adds their crypto companies are willing to target the U.S. market considering its huge size and investor participation.

“Folks want to come to the U.S. and touch our investor and set up shop here and I think having strong markets encourages that in the long run, maybe not in the short run.”