SEC Proposal: 3-Year Security Laws Exemption For Crypto Projects

The newest safe harbor SEC Proposal by the Commissioner Hester Peirce could see Blockchain projects experiencing a three-year exemption from the securities laws of the United States in order to build decentralized networks as we are reading more about it in the latest crypto news.

Cryptocurrency projects that offer tokens with the promise of building a decentralized network will probably fall under the jurisdiction of the securities laws of the United States. The Securities Exchange Commission (SEC) has over and over again repeated their stance both through public statements and high-profile enforcement actions.

Projects usually circumnavigate these restrictions in two ways. “Regulation D” exemptions which restrict issuance to wealthy individuals, also known as “accredited investors” and “Regulations S” exemptions, that restrict issuance to overseas investors. Eventually, the two aforementioned ways result in restricting the availability of tokens to end-users and the public.

The Securities Exchange Commission (SEC) has also begun ramping up high profile enforcement actions. Block One, the firm responsible for launching EOS, was ordered to pay $24 million penalties for its initial coin offering (ICO). Telegram had its bullion dollar sale halted. Another messaging app, Kik was charged with organizing a $100 million unregistered offering.

The Securities Exchange Commission SEC proposal aims to act on entities that sell tokens without the appropriate disclosures and registrations. As a result, many cryptocurrency projects with huge potential have moved overseas, restricted access to United States customers, or have closed down entirely. On February the 6^th the Commissioner Hester Peirce gave the proposition for the creation of a new regulatory save harbor for blockchain projects that are building decentralized networks.

The ones that can show that they are raising funds and making progress toward an open-source, permissionless network, and can make the suitable disclosures to the public- would get a pardon from the securities laws of the United States. If enacted, there will be numerous benefits for the cryptocurrency community in the United States. Developers will have the opportunity to fundraise, investors will have the opportunity to access more comprehensive information, and the public will benefit cutting-edge technology. This is not without any challenges. The threshold for “sufficiently decentralized” is unclear.

 “Legally speaking, this line is drawn when a token purchaser stops relying on the technical and managerial expertise of the issuer/promoter for any profits she might expect,” said Marco Santori, Chief Legal Officer at Blockchain Inc.