SEC’s Crypto Sheriff Signals a Modicum of Flexibility For Some Token Projects

By Kapil Gauhar

Good news is finally here for some blockchain token projects. Now, there’s no need to stand in the queue to fill out all the US securities registration requirements. And, there’s no need to be worried about getting your application rejected, in case you can’t match up with the requirements.

Some blockchain token projects will soon have a reason to skirt those registration requirements by obtaining a so-called ‘no-action letter’ from the Securities and Exchange Commission.

Yes, that has been confirmed by an agency official, Valerie A. Szczepanik, at a gathering hosted by the Wall Street Blockchain Alliance in New York. However, made it a point that such would be rare.

Valerie A. Szczepanik was appointed to SEC’s brand new position of Senior Advisor for Digital Assets and Innovation for Division Director Bill Hinman, and Associate Director of the Division of Corporation Finance.

She stated,

“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.”

What Generally Happens By Far?

The token issuers, in a general sense, have three options for conducting an Initial Coin Offering –

1. Register yourself as a securities offering
2. Apply for an exemption
3. Make sure they’re not a security

The Change SEC Bringing on The Table

In limited cases, the SEC will have a right to decide that “perhaps the project doesn’t fit the letter of their law or regulation but that perfectly fits the spirit accomplishing all the goals of investors protection.”

In such rare cases, the SEC can issue a no-action letter for the blockchain token projects stating that the agency’s staff will not recommend any enforcement action against the issuer.

As Szczepanik remarked –

“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.’”

Where Will Be The Security Then?

Assuring the security, the William Hinman, the SEC Director of Corporation Finance, said that in his view a popular blockchain platform Ethereum is completely decentralized to the point, but it doesn’t really qualify as security at present.

Thus, it could be a great chance for the new token projects to make their mark in the market giving a tough competition to the leading blockchain projects.