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Not all tokens are securities: US SEC

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SEC.gov Regulation A view from inside the machine Crypto Heroes

Commissioner Hester Peirce, a member of the US Securities and Exchange Commission (US SEC), revealed that not all tokens could be considered securities. Peirce made this remark at a conference organized by the University Of Missouri School Of Law on February 8.

A transcript of the speech was published on SEC’s official website, with Peirce talking extensively about the rules for crypto tokens and their classification. In her remarks, Pierce said, “When the tokens are not being sold as investment contracts, however, they are not securities at all. Tokens sold for use in a functioning network, rather than as investment contracts, fall outside the definition of securities.”

The SEC commissioner has previously defended the right for there to be an approved Bitcoin ETF. In her speech, she pointed out that, while innovations are inherently positive, they also carry risks. There have been doubts about the usefulness of cryptocurrencies to the global economy. Pierce, however, believes that it usually takes a few years for the true value of some innovations to come to light, especially in the financial sector.

Pierce admitted that the SEC is currently struggling to regulate the cryptocurrency and blockchain space due to their decentralization. She said, “We (SEC), along with other regulators, are asking how existing rules apply in this space and whether a new regulatory framework would work better. If we act appropriately, we can enable innovation on this new frontier to proceed without compromising the objectives of our securities laws—protecting investors, facilitating capital formation, and ensuring fair, orderly, and efficient markets.”

For many tokens in the crypto space, the act of being labeled ‘security’ is a death sentence due to huge cost and time involved in achieving legal compliance. For this reason, most crypto projects did their best last year to avoid being branded as a ‘security,’ registering their companies outside the US, and restricting US users from investing in their token sales. The statement by Pierce could imply that the US SEC is ready to reconsider crypto tokens and loosen its grip soon.


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