The projects would have a 3-year grace period, but they must present reports. A lawyer must certify that the networks operate in a decentralised manner.
Commissioner Hester Peirce (SEC) updated a proposal that would regulate the trading of tokens or new crypto-assets through Initial Coin Offerings (ICO).
The guidelines, known as “safe harbour” (Token Safe Harbor 2.0), would allow companies to sell their tokens, but with the guarantee that they would not clash with current securities regulation. Peirce’s proposal appeared the first time in February last year. However, it now features three stages.
First of all, 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 have a block explorer.
The second feature is that, once the period develops, the token meets its end. The company must present a report that will be a subject of analysis by an external lawyer. The advisor must validate that the network that supports the token works in a decentralised way.
The third installment shows that the final report and the considerations of the advisor would not be the last word on the project. The goal is to present valuable standards for each network studied in the Commission’s analysis.
Peirce’s suggestions appeared on the SEC’s website. Curiously, the official also published the document on the GitHub collaborative platform to promote “decentralised knowledge”, in her own words.
The “safe harbour” update already accumulates multiple requests and contributions. Some of them went for the definition of decentralisation. Another interesting thought was that of Paul Barclay when he said: “It is possible to have a decentralised application running on a centralised network, at least partially. For example, an ERC-20 token embedded in an iOS application.”
The Regulation Proposal and its Compliance
If a company satisfactorily meets every single requirement outlined in the standard, then startups would avoid registering the tokens with the SEC as securities, and there would be no risk of lawsuits.
The operation of the network would not prove to be under decentralisation after three years of development. In that case, companies must register as issuers of securities to avoid potential lawsuits.
Commissioner Peirce is recognized within the bitcoin ecosystem as the “crypto mom” because she tries to make bitcoin more relevant and visible. In February 2019, the official warned that applying more complex regulations could cut the growth of crypto assets.
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 crypto active is unregistered security, while the company assures that it is a “virtual currency.”
By: Jenson Nuñez
