US Lawmakers to SEC Chairman Jay Clayton: Clarify Securities Token Classification
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US Lawmakers to SEC Chairman Jay Clayton: Clarify Securities Token Classification

In a letter dated September 28th, the Congress of the United States requested precise clarification concerning the designation of securities in the cryptocurrency space. The inquiry recognized the difference between digital tokens and securities, where the confusion of such has the potential to disrupt American innovation in both the financial and technology sectors.


Uncertainty Surrounding Securities Tokens

The new wave of securities tokens has apparently caught the attention of US Congress. The new document was addressed specifically to SEC Chairman Jay Clayton, who has shown support for securities tokens in the past.

However, the SEC’s precise definition of securities— in the realm of distributed ledger technology— remains a mystery. This is precisely what Congress has inquired to know. As stated by the US Congress,

“The SEC should clarify the criteria used to determine when offers and sales of digital tokens should properly be considered ‘investment contracts’ and therefore offerings of securities.”

How Securities Tokens are Important for the US Economy

The main concern regarding the inquiry seems to involve the US economy. Such a stance strongly reflects the significant potential embedded in the future of securities tokens. Other countries— to include Malta— have seemingly jumped to the forefront of securities token regulatory framework.

Yet now, it seems as though the US wants a share of the new wave of financial assets:

“Current uncertainty surrounding the treatment of offers and sales of digital tokens is hindering innovation in the United States and will ultimately drive business elsewhere. We believe that the SEC could do more to clarify its position. Additionally, we are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.”

At the same time, the US Congress recognized the importance of patience in such a process.

“Recognizing that such guidance will, reasonably, take time, caution, and deep consideration, we request your views on the following foundational issues with respect to digital tokens to further a longer-term goal of developing formal guidance.”

The inquiry comes with no surprise, especially since other details of the letter declared the importance of such technology in many realms of the American economy. Congress wants digital securities to be treated as such, meaning they ought to comply with securities laws. Yet this does not mean that all digital currencies fall under the same category.

For the average innovator in this space however, deciphering such criteria can be difficult. That’s why Congress put forth such requests.

“Please describe the tools available to the SEC to offer more concrete guidance to innovators on these topics.”

The Future of Securities Tokens in the United States

Despite all of this, the letter closed with one final remark. While the following advancements by the SEC ought to be thoughtful and strategic, the current technology is developing at a remarkable speed, which the current financial system simply doesn’t account for:

“When considering these topics, we caution that any agency should be mindful of the speed at which the industry is developing, and that new and dynamic circumstances could render stringent guidance obsolete. As a result, any response should strive to endure future evolution of the technology.”

What do you think of the recent inquiry made by the US Congress? Will this result in the SEC defining the regulatory framework for securities token compliance? We’d love to know what you think in the comments below.


Image courtesy of MSNBC.

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September 28, 2018

About Author

SamBocetta Sam Bocetta is a retired security analyst with over 35+ years working in the public and private security sector advising against cyber warfare. Sam has worked with some of the largest global defense companies developing integrated systems for security and communication. Despite his previous work experience, Sam is a strong supporter and believer in decentralization.