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Startups that have made initial coin offerings (ICO) several years ago may be eligible for potential enforcement action by the US Securities and Exchange Commission, said a senior executive of the US Securities and Exchange Commission on Friday. # 39; agency.
In the last year and a half, the regulator has sued projects that raised money by selling tokens without registering them as securities. But in his opening remarks at the agency's FinTech forum in Washington, D.C., William Hinman, the SEC's director of corporate finance, said crypto-currencies were able to move from one potential security to another.
"Digital badets can evolve into an instrument that no longer needs to be regulated as such," he said.
Hinman has already made the same remark. In a 2018 speech, he hinted that Ethereum may have sounded like a security during its launch, but said that last year it was decentralized enough to become a security.
Although he did not refer to Ethereum on Friday, Hinman used other examples to illustrate his point.
As an example, he cited TurnKey Jets, which had obtained a non-intervention letter earlier this year, rebaduring the company that SEC staff would not recommend taking coercive action against it.
Hinman explained that the token, the network and the use case of the company were all quite advanced at the time of sending the letter, which meant that the token had a functional use case and that the network was fully developed.
However, Hinman pointed out that although some aspects of the project were not yet fully developed, the SEC may have always been willing not to intervene.
"If they needed more respite on the secondary market for this token, it would not be outside of a possible letter of no intervention," he said.
And what would happen if?
Taking this example a step further, Hinman posited the hypothetical hypothesis: what would happen if the eventual TurnKey model existed three years ago, without a mature network or functional token?
If this hypothetical start-up sold its token "at amounts uncorrelated to its use case but looked like financing", then this token would look like a guarantee.
However, if three years later, this startup company went to the SEC and showed that its features were related to the utility, the SEC might be willing to collaborate with the company, said Hinman, adding:
"We would probably be able to work our way through a letter of no-action."
Stephen Palley, an attorney from Anderson Kill who attended the forum, told CoinDesk that he thought Hinman was indicating that a token that looked like an investment contract could turn into a token utility.
In addition, said Palley, it was interesting that the SEC had indicated that she was using her framework to make this type of determination.
In his remarks, Hinman noted that the SEC's actions to date have been conducted in accordance with its statutes and rules in effect.
"I mention this to show the flexibility of the regulatory framework in which we work," he said.
Image William Hinman via Nikhilesh From for CoinDesk
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