The SEC Publishes its Highly Anticipated Crypto Token Guide

Token issuers now have guidance from the US Securities and Exchange Commission (SEC). They have finally released their regulatory guidance, as it has been in the works for a year and a half now. The new guide will target outlines and tokens and how they fall into a securities category. Director of Corporation Finance at the SEC, William Hinman, mentioned plain and simple, “The guidance will assist token issuers with determining if their digital asset is a security or not.” The framework that has been used for this is the DLT framework. It’s a list of factors of what token issuers should consider when it comes to their asset being a security or not. Some of these factors are: expectation of profit, whether group entities or a single entity are responsible for certain actions within the network, or whether the group is making and helping a market for a cryptocurrency. The guidance also encourages token issuers to look at tokens that have been sold in the past to evaluate if they should have been considered securities. The guidance does have a disclaimer of not being a legal binding document, and should be used merely as a guideline. While the guidance describes securities classifications, there are many questions still unanswered. The SEC still has not answered how they will handle custody for broker-dealers that possess digital currencies.

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