Templum, a platform for Tokenized Asset Offerings (TOA) and secondary trading, has recently submitted a letter to the US Securities and Exchange Commission (SEC) requesting clearer regulatory guidance. Templum has suggested that the proper evolution of Fintech requires a clearer framework when it comes to the post-trade activity of digital assets.
Templum’s Petition to the SEC for Clearer Guidance Explained
In a letter from mid-December 2018, Templum asked the SEC to clarify its stance on the regulatory requirements for security tokens.
More specifically, Templum has probed the SEC to “provide needed guidance related to post-trade activities in the digital asset space”.
The young security token industry has seen initial implementation throughout 2018. Traditional financial securities such as equity, investment funds, fine art, and even real estate have undergone tokenization. Yet still, a clear regulatory framework for security tokens remains absent.
The regulatory ambiguity has resulted in Congress asking SEC Chairman Jay Clayton to clarify the SEC’s stance on security tokens earlier this year. The SEC has responded by suggesting security tokens are susceptible to existing securities laws.
Templum is not satisfied with such a response, and their recent letter to the SEC has implied that the lack of clarity concerning post-trade activities is hindering the continued development of the security token industry.
The Criteria of Templum’s Letter to the SEC
Templum has therefore asked the Commission to update its regulatory framework in order to account for modern technology, including blockchain-based securities. The letter focused on the following three areas of primary concern:
- The SEC ought to clearly define when a blockchain-based platform must register as a clearing corporation and define how such firms can legally utilize blockchain technology
- The SEC ought to provide clear, public guidance to the entire industry concerning when a blockchain-based platform must register as a transfer agent, and provide guidance to digital asset issuers concerning when they are required to use a transfer agent
- The SEC ought to update the Custody Rule and Customer Protection Rule to account for and promote the ability of blockchain technology to safely and efficiently track securities transactions
The letter, which was signed by senior Templum executives Vincent Molinari and Christopher Pallotta, highlighted the increased need for current legislation to adopt to the world’s technological capabilities in order to provide for a safe and effective future of investing:
“We believe Fintech and blockchain have tremendous potential. However, as this technology develops, regulators must foster innovation without stifling it through unclear regulations. US and foreign regulators have noted the disruptive potential of Fintech and blockchain. They have also recognized the potential of Fintech to revolutionize the financial services industry. We share this belief in the transformative nature of Fintech and support the role of regulators in ensuring that this revolutionary technology develops in a sustainable manner that promotes fair and orderly markets, protects consumers and benefits industry participants.”
Even in the midst of increased SEC activity to include legal actions against cryptocurrency exchanges and ICOs, the SEC has publicly claimed that it wants to help the quickly advancing security token industry. For example, the SEC launched a Fintech hub in October 2018 to streamline regulatory compliance.
How the SEC will respond to the request for clearer post-trade requirements is yet to be seen.
What do you think about Templum’s request for a clearer framework regarding post-trade requirements? How do you think the SEC should respond? Let us know what you think in the comments below.
Image courtesy of Templum.