Key facts:
The projects would have a 3-year grace period, but must submit reports.
A lawyer must certify that the networks operate in a decentralized manner.
Commissioner Hester Peirce, a member of the United States Securities and Exchange Commission (SEC), updated a draft of proposals that would regulate the trading of tokens or new crypto assets through Initial Coin Offerings (ICO).
The guidelines, known as “safe harbor” (Token Safe Harbor 2.0), would allow companies to sell their tokens, but with the guarantee that would not conflict with current securities regulation. Peirce’s proposal was originally raised in February last year, however, it now features three novelties.
The first is that startups would have a three-year grace period for their developments, something already raised in the past by Peirce. However, the commissioner’s updated proposal is that companies should submit progress reports every six months and also have a block explorer.
The second aspect is that, once the period to develop the token is over, the company must present a report that will be analyzed by an external lawyer. The advisor must validate that the network that supports the token, works and does it in a decentralized way.
SEC Commissioner Hester Peirce promotes regulations in favor of cryptocurrencies. Source: Wikipedia.
The third point is that the final report and the considerations of the company advisor would not be the last word on the project. The goal is to present useful benchmarks for each network studied to be considered in the commission’s analysis.
Peirce’s suggestions were shared on the SEC’s website. Curiously, the official also published the document on the GitHub collaborative platform in order to promote “decentralized knowledge”, in her own words.
The “safe harbor” update already accumulates multiple requests and contributions. Some of them revolved around the definition of decentralization. One of the opinions was that of Paul Barclay when he said: «It is possible to have a decentralized application running on a centralized network, at least partially. For example, an ERC-20 token embedded in an iOS application.
Comply with the regulation proposal
From the foregoing it follows that, if a company satisfactorily complies with the requirements set out in the standard, then the startups they would not have to register the tokens with the SEC as securities. In other words, there would be no risk of lawsuits, lawsuits or fines.
Now, if the operation of the network does not prove to be decentralized after three years of development, then companies must register as issuers of securities to avoid potential lawsuits.
“The updated version reflects the constructive feedback provided by the crypto community, securities lawyers and the public. I am grateful for the thoughtful engagement and believe it demonstrates the need for regulatory clarity in this space. However, there is more work to be done, “Peirce added in the public statement.
Commissioner Peirce is recognized within the bitcoiner ecosystem as the “crypto mom” for her efforts to make cryptocurrencies like bitcoin visible. In February 2019, the official warned that applying very strict regulations could cut the growth of crypto assets, as reported by CriptoNoticias.
Currently the SEC maintains a lawsuit against the company Ripple and its founders whom it accuses of trading millions of dollars with XRP. The commission considers that the cryptoactive is an unregistered security, while the company assures that it is a “virtual currency”.
