The U.S. Securities and Exchange Commission (SEC) announced a new framework, aiming to help crypto participants determining whether a digital asset is offered and sold as an investment contract or not. The news was published via an official statement on April 3.
The guideline is the work of two commissioners: Bill Hinman, director of Division of Corporation Finance and Valerie Szczepanik, senior advisor for Digital Assets and Innovation, also known as the “crypto czar” of the Commission. The framework itself is neither a rule, regulation, nor a U.S. Commission’s statement, which has not been approved or disapproved.
The author also makes it clear that the guideline is by no means complete and should not serve as legal advice. Its main purpose is to provide participants with an analytical tool that will help operators of initial coin offerings (ICO) and token issuers determine whether their offering would fall under federal securities laws.
In agreement with the 71-year-old Howey test, the framework also tackles all aspects regarding digital assets. The author also commented that “in evaluating digital assets, we have found that a ‘common enterprise’ typically exists.”
A six-page long document was devoted to the most complex standard: “A reasonable expectation of profits derived from the efforts of others” — noting that this is usually the “main issue in analyzing a digital asset under the Howey test.”
Multiple administrators and crypto industry figures have demanded the SEC to grant greater regulatory clarity between the interactions of blockchain-based tokens and securities laws.