TokenSoft Loosens Client Restrictions on Law Firms as More Practices See Digital Assets as Securities

TokenSoft Loosens Client Restrictions on Law Firms as More Practices See Digital Assets as Securities

According to an announcement dated May 1st 2019, TokenSoft will now be accepting clients with legal advisors who have not been vetted or previously approved by the company. The latter was a measure previously taken to reduce the chance of non-compliance, but with more entities seeing digital assets as regulated securities, TokenSoft is changing its stance.

Why TokenSoft is Loosening Restrictions on its Clients’ Law Firms

TokenSoft is a compliance platform for tokenized securities. The company assists with the launch and life-cycle management of securities issued via Distributed Ledger Technology, consequently known as security tokens.

It is also home to the Knox Wallet, the first-ever security token custodial service.

To ensure regulatory compliance, security tokens within the jurisdiction of the US Securities and Exchange Commission (SEC) must abide by existing securities laws.

As a result of the highly regulated space, TokenSoft previously required its clients to only utilize vetted and approved law firms.

According to TokenSoft CEO Mason Borda,

“When we launched TokenSoft, we were well aware that the legal landscape was new to blockchain-based issuances of securities. In order to mitigate legal risks, we decided to perform due diligence on a select group of law firms that shared our conservative view that digital assets should follow securities regulations.”

With an ongoing transition in the digital asset industry however, they are now loosening that restriction.

Borda continued,

“In retrospect, doing this helped protect our clients and encouraged them to take a more conservative approach, which has paid off given that the regulators now echo much of this sentiment. When issuers come to us today as their technology partner for a compliant issuance, they typically have already engaged a law firm for their project, and if their counsel carries the SEC’s perspective, we don’t want to be a reason for changing that important relationship.”

The Emerging Recognition of Tokens as Securities

The reasoning is due to recent SEC guidance concerning digital assets, which provides a general overview of the compliant use of digital assets in the eyes of the SEC.

Now, the majority of larger, global law firms feature blockchain practices. They also include attorney’s with a strong background in traditional financial securities.

TokenSoft sees the trend of both market participants and legal advisors as classifying DLT-issued tokens as regulated instruments.

Borda says,

“For our business, this means that we are less concerned that attorneys may allow their clients to adopt an interpretation of the regulations which carries higher risk. Now, we can serve a broader client base due to this common understanding that comes from clearer regulatory guidance.”

What do you think of TokenSoft lessening its client restrictions for law firms? What does this say about the current state of regulated security tokens in the United States? We want to know what you think in the comments section below.

Image courtesy of TokenSoft.

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