- FinHub publishes a framework to analyze whether digital assets should fall under ‘security’
- No-Action letter to offer guidance on tokens
- Mixed reaction in the crypto community’s take on the news
On April 3, 2019, the Director of Division of Corporation Finance, Valerie Szczepanik, Bill Hinman, released a statement on “Framework for ‘Investment Contract’ Analysis of Digital Assets.”
Digital asset may be termed as a security under the US federal security laws depending on the nature of the digital asset. In that note, a framework is being published by FinHub that will be used to analyze whether the digital assets are offered as security. This framework is not here to replace any laws or regulations since the commission has not yet approved of the contents of the framework.
The Framework
This framework that is being published by FinHub to analyze the nature of digital assets is also set to offer assistance to those who seek to comply with the U.S federal security laws. The framework, however, has not been designed as a full overview of the law but rather it is a tool to help market participants analyze whether a particular digital asset offer or sale fall subject to the federal security laws.
The framework will determine whether a particular digital asset has the features of a particular security and not the full scale of possible securities. It is a representation of the staff’s view and not a rule or an official statement made by the commission; thus the framework is not binding on the divisions or the commission. But still, it is essential for the market participants who may be conducting business that is under the SEC jurisdiction.
No-Action Letter by SEC to Offer the Long-Awaited Guidance on Tokens
The no-action letter by the SEC has highlighted reasons not to consider some digital assets as security.
However, the division of corporation finance has indicated that it will not recommend action enforcement to the commission if the digital asset is sold or offered with no registration under the security laws. The no-action letter is not binding on courts but rather is only applicable to the recipients.
Crypto Community’s Reaction to the News
Many people in the crypto space believe this is good news and shows SEC’s positive attitude towards digital assets.
Meanwhile, crypto traders believe that it is a step closer to the long-awaited ETF approval. Even if the framework is not legally binding it will be beneficial – it is still security, and any more legal guidance in crypto space is welcome. And as always, there are a few users who think that it is just more bullshit centralizing crypto.
