William Hinman, Director of Corporate Finance for the Securities and Exchange Commission (SEC) spoke at FinTech Week in D.C. on Monday. He said that the SEC will soon have “plain English” guidance for ICOs.
The SEC is well aware that many want definitive answers, and Hinman offered some reassurance on the matter
Hinman says they will publish clearer information based on their investigations this last fiscal year. With this information, developers will be able to determine themselves if their token is a security or not. He added,
“Once you determine whether you have a security, we’re going to have in that guidance, ‘How do I go about registering?’ and ‘How do I go about doing an exempt offering?’”
One major indicator of whether or not a token is a security is something the SEC has already mentioned many times. Does the ICO promise or imply that there is a return on investment? The full excerpt is as follows:
“If someone’s offering an instrument for money or other consideration to a third party, and that third party expects the offerer to generate a return or so something that will increase the value of the coin or token or whatever they want to call it, and there’s that expectation of return, we’re generally going to see that as a securities offering”
Many ICOs that have avoided unwanted attention from the SEC have marketed their currency as “utility tokens”
These of course are to be used for in-network services, as a sort of membership fee in many cases. Likewise, some companies stated explicitly in their white papers that they don’t promise any returns.
As of now, Hinman and the SEC have not announced when such information will be published
Nor is it clear whether these rules will simply be a guideline, or whether they’ll be formal regulations. In the meantime, the SEC’s FinHub is available to token developers. Here they can find all the information on digital assets that the SEC released so far, as well as connect with regulators.
Many critisize the SEC for taking so long to regulate cryptocurrency. Developers and investors, as well as legislators, want greater clarity. However, at least they expressed an interest in not hindering legitimate crypto businesses.
While regulation will help eliminate the current gray areas, crypto has not been banned here as it was in other countries. And as more announcements from the SEC are imminent, there is hope that regulations will be finalized in due time.
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