In the United States, it seems plausible that the Securities and Exchange Commission or SECOND could evolve towards greater openness ICO phenomenon, and let’s see how.
February 6, Hester Peirce, Commissioner of the SEC, presented a proposal for a new regulatory framework to be applied to the phenomenon of the initial supply of coins. It seems to me suggestive that it is a woman who is the voice of the appropriate need to embark on the path of change. In her speech, she begins by telling an episode from her personal life twenty years earlier: she was on the road, under a strong storm, without a mobile phone, who knows where, when she realized that the tank of petrol from his car was empty. The first natural reaction was panic, followed by the discovery that she was in the state of New Jersey and the feeling of comfort in seeing a gas and petrol pump in the distance. At that moment, she realized that she was on the territory of New Jersey, where there was a singular law prohibiting anyone who was not a service station attendant to refuel! No one else was allowed to refuel independently! “I waited impatiently for the attendant at the gas station, awake from a comfortable sleep when I arrived, leaving his cabin and starting the pump. He looked at me. I’ve watched it. He pointed at me. He showed the pump. His message was clear: forget the law, there would be no full service this dark and stormy night. Without revealing her choice for that night, the commissioner explained that this episode taught her an important lesson, which she quoted as follows:It is important to write rules that well-meaning people can follow. When we see people struggling to find a way to both obey the law and achieve their laudable goals, we must ask ourselves if the law needs to change so that they can continue their efforts with the confidence that they are acting legally“. Therefore, “today I’m going to focus on how to meet the regulatory challenges faced by people who want to create functional token networks. “
Until now, the SEC has always treated most tokens as investment contracts and share offers according to Howey’s test. Peirce, at this meeting, proposes instead to treat certain tokens, not as securities, but to grant their sale to investors not accredited in the United States, provided that the disclosure and other requirements set out in a “safe port”Discipline is respected. In the previous “FrameThe SEC had in fact analyzed cases in which tokens, if at the time of their issue, could be considered as securities, then, when the network had become decentralized, they could change “nature”. These cases raised doubts, which the SEC proposed to resolve, by changing the SEC’s totalitarian view of all tokens as securities and therefore subject to sales and trading restrictions imposed by laws and regulations which limit their use in a decentralized manner.
Therefore, the Commissioner proposes a so-called “Grace period”From three years to create a safe port, within which the decentralized network could be formed. Such as “network maturity»Would take place under certain conditions, which would materialize during the establishment of the network:
– is not controlled, it is not reasonably likely to be controlled or modified unilaterally by a single person, entity or group of persons or entities under common control;
– it is functional, as shown by the ability of owners to use tokens for the transmission and storage of value, to demonstrate control of tokens, to participate in an application running on the network or in a way consistent with its usefulness.
It would then be up to the development team to act in good faith and in all transparency to implement secondary trading on trading platforms, which although ostracized before by SEC regulations, becomes essential to create liquidity at benefit of users and developers.
Transparency must be ensured by the disclosure of all ordinary and extraordinary information, such as the source code, the economy of tokens, i.e. their offer, generation, distribution and the governance; the network development plan; the development team, their experience and their chip previews; token exchange platforms to the extent known; and notices of sale of more than 5% of the tokens initially held by members of the initial development team, all within fifteen days of the initial sale of the tokens: “The last condition is that the team must submit a notice from EDGAR, within a period of fifteen days from the date of the first sale of tokens, by relying on the safe harbor. (Editor’s note: The EDGAR database provides free public access to company information, enabling information retrieval and financial transactions of a public company by examining documents filed by the company with the SEC. It is also possible to search for information provided by mutual funds, exchange-traded funds and variable annuities).
As she rightly pointed out in her speech, “I think there is a way to resolve the uncertainty of the application of securities laws to tokens. The refuge I propose this morning recognizes the need to achieve the investor protection objectives of securities laws, as well as the need to provide the regulatory flexibility that allows innovation to thrive.. “
If you wish to read, and I highly recommend it, the full speech of the Commissioner, here is the link: https://www.sec.gov/news/speech/peirce-remarks-blockress-2020-02-06.
All rights reserved
Raffaella Aghemo, lawyer