SEC confirms to publish ICO guidelines, in “plain English” to classify tokens and securities

According to commission director William Hinman, the SEC plans to release a "plain English" guidance on ICO regulation after years of skepticism.

7 Nov 2018 2 min read

The U.S. Securities and Exchange Commission [SEC] has guaranteed to clear up the long-standing perplexity about how digital forms of money can be delegated as securities.

William Hinman, the director of commission spoke at the D.C. Fintech week and poised the audience of SEC’s involvement in resolving issues related to ICO tokens and other digital assets. Hinman confirmed that SEC will provide a guide to help cryptocurrency enthusiasts to understand and plan investments of digital assets. According to Hinman, the guidelines will be written in “plain English” for a better comprehension. He further supported his statement, saying:

“…the idea is a plain English instrument that people can look at and they’ll bring together sort of my Howey-meets-Gary speech and that analysis … We’ll elaborate on that in a very plain English way, so ‘do I think I have a security offering,’ look at that guidance and you should be able to sort things out.”

SEC’s upcoming guidelines look promising as the director explained it to be a document not only defining “if a token is a security or not” but also stated it to be a “step by step guide” on how to proceed further with the investment.

Once an investor determines the token to be a security, the guidelines will help him/her with questions related to “registering” and “exempt offerings”. Hinman also affirmed that the commission wants to give entrepreneurs and developers an understanding of how SEC views the projects and tokens post-ICO. The guidelines are expected to even address other issues such as crypto custody, token evaluation, and accounting standards.

Hinman also explained how the commission will monitor the digital assets and help the investors to gain a return on legal offerings. He said:

“If someone’s offering an instrument for money or other consideration to a third party, and that third party expects the offerer to generate a return or so something that will increase the value of the coin or token or whatever they want to call it, and there’s that expectation of return, we’re generally going to see that as a securities offering.”

In early 2018, Hinman stated that Ethereum [ETH] was instigated through an ICO in 2014 which was not deemed as a security. He also provided an insight into the standards that are used for classification of ICO tokens as security, as they kept ROI [Return on Interest] as the primary key.

As per the speech, the SEC director did not provide a timeline for the release of the guidelines. Although, he noted that the SEC will be transparent with the process and will update the audience on its progress. Hinman suggested that the newly published “FinHub” portal will give quick answers to questions related to securities and token offerings. On the other hand, developers can also direct questions to Finhub if they need more clarification than the upcoming guide.

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