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A legislators want the Securities and Exchange Commission to provide a more official guide to initial cryptocurrency coin bids.
In a letter sent to SEC President Jay Clayton on Monday, 16 legislators – 14 Republicans and two Democrats in the House of Representatives – asked for clearer guidelines on how to see the main financial rules applicable to growing digital resources. Representatives Ted Budd, R-N.C., Tom Emmer, R-Minn., Warren Davidson, R-Ohio and Darren Soto, D-Fla., Led the letter.
"Please broaden the criteria currently used by the SEC – specific for digital tokens – to determine under what circumstances the offer and sale of a digital token should be properly considered an" investment contract "and hence a & quot; Offer or sale of securities "pursuant to the Securities Act and of the Howey test ", wrote the members of the Congress, invoking a fundamental law and a legal ruling on the matter.
It's a big problem for a growing industry. Initial tokens, in which startups increase tens of millions of dollars through the sale of a digital token, often before operations begin, have exploded over the past two years, raising billions. But the digital tokens sold in those ICOs often have value after their initial sale and often the projects fail to materialize or happen after the raising of funds, leading to concerns for investor protection.
Clayton and other SEC officials said the laws governing investment activities such as stocks and bonds apply to digital currencies in most cases, which means that the SEC requires initial money bids to be registered with the SEC as stock offers. But they also admitted the possibility that a digital currency could overcome that definition due to alternative uses, such as decentralized computing, as well as raising funds for companies.
Bitcoin, the cryptocurrency with the largest market value in the world, and Ether, the second largest, seem to have already reached that point. Ether is especially designed for use in decentralized computing, in practice large scale peer-to-peer computing.
In a testimony before the Senate Banking Committee and during public interviews, Clayton has repeatedly stated that ICOs are securities offerings, which means they must register with the SEC and disclose more information to investors, such as companies that finance crowdfunding or offer subsequent sanctions and legal actions.
Clayton's past observations talk about how he sees the ICOs in general, but he and others have said that some tokens may cease to be considered security if used for other purposes than raising initial funding, leading some companies to claim a so-called utility token & # 39; exemption.
The legislators who write Clayton are asking for more concrete guidance on the topic from the SEC, but they also push the agency to provide clemency for cryptocurrencies as an emerging technology.
"We believe the SEC could do more to clarify its position," the legislators write, adding that they are concerned that the financial regulatory agency will only act through enforcement.
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