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The Blockchain Association has invited the Securities and Exchange Commission (SEC) to issue more formal indications on cryptocurrencies. As such, it outlined a proposed regulatory framework based on previous SEC comments.
Through a post on Medium, The Blockchain Association attempts to encode the language issued by the Finance Department of SEC Corporation William Hinman. titled The Hinman token standard, Blockchain Association suggests the following guide:
"A project should meet decentralization standards if it were more decentralized than the Bitcoin or Ethereum networks on 14 June 2018".
The rationale behind this statement comes from Hinman's clarification of June 2018 on bitcoin and ethereum not considered as securities. It follows that if bitcoin and ethereum were sufficiently decentralized on that date, then other projects should aim to meet this standard.
"This uncertainty has a suffocating effect on investments"
The SEC has yet to provide formal guidance on the matter. However, he suspended several cryptographic projects and initial offers of coins (ICO) considered illegal.
In addition, SEC President Jay Clayton publicly stated: "I believe every ICO I've seen is a security".
If cryptocurrencies are considered securities, they will be subject to much stricter rules for investors. As the Blockchain Association explains, "We need to know when tokens qualify as securities and when they do not, innovators know what regulatory regime applies."
The contradictory statements and lack of clarity are stifling creativity and forcing promising startups outside the United States.
"More decentralized than the Bitcoin or Ethereum networks on June 14, 2018"
The guidelines proposed by the Blockchain Association suggest that the SEC follows the conclusion that Bitcoin and Ethereum are sufficiently decentralized. Future policies should use this starting point as a foundation, they exhort.
The association claims that this is a reasonable starting point with room for a centralized leadership when required.
Other proposals suggest implementation The Howey test to cryptocurrency projects. The Howey Test outlines the definition of a security or investment contract and revolves around the expectation of profit from a particular promoter or a third party.
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