SEC Commissioner, Hester Pierce, issued the proposal during a speech at the International Blockchain Congress in Chicago. According to her, SEC thinks about allowing some blockchain startups to exempt from current securities regulations. In that case, crypto-asset companies would have three years to prove that they are decentralized enough to pass a Howey test.
Investors’ opinions differ about the U.S. Securities and Exchange Commission’s offer. While some met it with optimism, the others think that it can seriously hurt the crypto industry. The office’s proposal would enable the newly issued cryptos to reach the state of sufficient decentralization during the three years. Thus, it would no longer rely on the company that created it. There are already several examples of such cases. But the offer has its drawbacks too.
How does the system work?
The cryptocurrencies are uncontrollable by third parties, and they are available only for the owner. Nevertheless, when the company earns new crypto and sells it to investors. The U.S. considers this a security offering.
The Office has some precaution measures so that investors could hold the companies accountable if they suspect shady transactions or dubious money loss. According to the existing regulations, those companies, who offer securities, must be registered with the SEC.
As a result, most tokens sold via initial coin offerings are securities. The office explains security as investors’ expectation to profit from the work of a third party after sinking their money in a common enterprise.
While the SEC’s commissioners stated that suggested change can ultimately play a good role in the cryptos’ development, some other parties don’t agree with them. They fear that the proposal will enable shady dealings in the crypto industry. The companies could raise money and focus on the safe harbor period instead of delivering value to investors. – noted Bruce Fenton, CEO of Chainstone Labs.