Since crypto-currencies first hit global markets in 2009, there has been a long-standing debate about whether a company’s initial offers (Initial Coken Offering) should be classified as securities or if they are sufficiently decentralized to escape SEC jurisdiction.
To date, the SEC has filed lawsuits against a number of companies that created and sold tokens, including Telegram and Kik, two major messaging platforms. Another example is Ether (ETH), which, according to William Hinman, the SEC’s director of corporate finance, initially appeared to be a security but, as it matured, no longer qualified as such.
Innovative crypto projects could emerge
Hester Peirce, often referred to as „Crypto Mama“, was first appointed to the US Securities and Exchange Commission in early 2018 and has been a strong advocate of crypto currencies ever since. And although this is not the first time she has lobbied for the creation of a protected haven for crypto currencies, the announcement is the first formal attempt to create the necessary framework for young crypto projects.
During the Commissioner’s speech at the International Blockchain Congress in Chicago, she outlined her proposal to allow a three-year grace period during which new start-ups can sell their initial tokens without them being considered securities.
In essence, the new safe harbour would anticipate current government securities laws and allow crypto projects sufficient time to mature their tokens into a fully decentralised crypto currency. However, this would not protect companies from being sued for illegal activities.
If Commissioner Peirce’s proposal is accepted by the SEC, it will seek to establish a strict framework that allows cryptographic projects to offer or sell tokens to raise money while protecting the interests of investors. This framework could lead to many new and innovative projects in the cryptographic currency industry.