Despite the ongoing regulatory clampdown against ICOs for failing to comply with securities law, SEC's senior advisor for digital assets, Valerie A. Szczepanik has confirmed that there are certain situations where tokens could be free from their oversight.
As reported by Coindesk, the top official was speaking to the audience at the Wall Street Blockchain Alliance (WSBA) held in New York on Thursday and explained that such ICOs would have to obtain a no-action letter from the SEC to exist freely.
However, she also pinpointed that such letters are not easy to get with the SEC, although it is also not beyond the reach of certain ICOs.
She defined the no-action letter as a “way forward for a lot of people who want to implement some of these things that may not exactly fit in the format of the rules that we (the SEC) want,”
Simply put, she was suggesting that such ICOs will have to make sure that they are not ‘security’ based on the way their token sale is structured.
For instance, instead of a situation where tokens are sold to investors who expect profit in return, she said an ICO could exist as a fully developed ecosystem or a blockchain where a utility token is issued with no promise of profit.
“It is up to people to propose it so that it makes sense,” Szczepanik said.
If the SEC eventually approves such an ICO to exist as a non-security, then the no-action letter will be given to them to show that the regulators will not recommend any enforcement action against it.
Conclusively, she outlined that the SEC's new Finhub program could be of help to ICOs who wants to embrace this fundraising model.
SEC Securities Law Can 'Truly’ Be Defied By ICOs
The latest comments by Valerie A. Szczepanik has, without doubt, presented another scenario where ICO can operate with attracting the SEC's regulatory whip.
The other scenario involves an ongoing court case involving the SEC and the Blockvest ICO Issuers who have won a preliminary court injunction stating that their tokens do not fit into the standard defined for securities under U.S laws.
San Diego District Judge, Gonzalo Curiel ruled that the SEC has not provided enough evidence to show that those who bought into Blockvest's ICO were expecting profit in return.
In the long run, we expect that more scenarios where ICO tokens do not fit into Securities law continue to pop up and perhaps allow the emerging industry to bounce back from the recent downturn that it has faced in past months.
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