U.S. Releases Official ICO Guidance
15 Abril 2019 - 11:47AM
ADVFN Crypto NewsWire
Bitcoin Global News (BGN)
April 15, 2019 -- ADVFN Crypto NewsWire -- It was five months ago
that the U.S. Securities and Exchange Commission assured guests at
a conference during the Washington D.C. Fintech Week Conference
that there were guidelines for ICOs coming.
“We’ll elaborate on that in a very
plain English way, so ‘do I think I have a security offering,’ look
at that guidance and you should be able to sort things out.” -
William Hinman SEC Director
The result is a 13 page document
that does in fact present the primary objectives of an investment,
an ICO and the vital aspects of these financial procedures for both
investors and the organizations considering launching an ICO. The
document focuses on tokens and outlines how and when these
cryptocurrencies would be considered securities.
“The term “security” includes an
“investment contract,” as well as other instruments such as stocks,
bonds, and transferable shares. A digital asset should be
analyzed to determine whether it has the characteristics of any
product that meets the definition of “security” under the federal
securities laws.” - https://www.sec.gov/files/dlt-framework.pdf
Howey
Test
The epitome of determining whether
a digital asset is an investment contract is with the “Howey Test.”
The essential question is, “does the success of (in this case) the
digital asset relay primarily on the efforts of others?” This
question is broken down into just two key variables in the SEC’s
document:
-
Does the purchaser reasonably
expect to rely on the efforts of an AP?
-
Are those efforts “the undeniably
significant ones, those essential managerial efforts which affect
the failure or success of the enterprise,” as opposed to efforts
that are more ministerial in nature?
Re-Evaluation
The document also breaks down the
methods for re-evaluation after completion of an ICO, or at a time
when a digital asset is no longer being sold as an investment The
criteria is as follows:
-
The “distributed ledger network and
digital asset are fully developed and operational” (meaning
individuals can immediately use the token for some
function);
-
The token is focused on a specific
use case rather then speculation;
-
“Prospects for appreciation” in the
token’s value are limited; and
-
If billed as a currency, the token
actually operates as a store of value.
-
While this guidance has been a long
time coming, and provides some legal clarity for token issuers, it
is not a legally binding document, and should be seen more as a
guideline.
By: BGN Editorial Staff
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