The US Securities and Exchange Commission (SEC) has published a new guide for issuers of cryptocurrency tokens, which can be considered unofficial instructions for determining whether issued assets fall into the category of securities. The document has been drafted over the past six months by the agency's Strategic Hub for Innovation and Financial Technology (FinHub).
In particular, the document notes that when assessing the legal status of their financial instrument, tokens issuers are encouraged to pay attention to such factors as income expectations, the presence of centralized structures responsible for performing certain tasks in the network, as well as the ability to create and maintain digital asset markets.
In this context, the SEC refers to the Howie test applied to a wider range of financial instruments. From it, management included such factors as the dependence of the asset price on the actions of the project organizers, reasonable income expectations, probable areas of use, the correlation between the initial selling price of the token and its market rate of the token.
It is curious that in the context of the Howie test only one item “reasonable expectations of income from the actions of third parties” in the document is allocated several pages. As the authors note, it is this aspect that usually represents the greatest problem when analyzing digital assets.
The commission also explains how distributors of tokens, which are already in the hands of investors, should register their campaigns and whether the status of an asset, initially issued as a security, could be revised at a later stage.
Thus, in the process of revising the legal status of a digital token, the SEC applies the following criteria:
- The distributed registry network and digital asset are developed and functioning, that is, users can immediately use a token to perform a function;
- The token has a specific scope, not limited to market speculation;
- The token has limited growth prospects;
- When used as a currency, the token is able to perform the function of a means of preserving value.
The document is not an official guide and, therefore, is not legally binding. Also, it is unlikely to provide any fundamentally new legal information, only more deeply revealing the previously voiced position of the SEC representatives on this issue.