Sofiko is a freelance fintech copywriter at Coinspeaker. With a Bachelor degree in International Business and Economics, Sofiko has been deepening her knowledge of an agile innovative industry primary focusing on the robust blockchain technology and cryptocurrencies. As a bank employee, Sofiko particularly keens on crypto and blockchain integration into the established banking systems.
The crypto-darling SEC commissioner Hester Peirce is explaining delays in a regulatory toolset for token offerings as she mobilizes financial authorities to work on a deliberate approach to digital assets.
A couple of years has passed since the first wave of ICOs hit the market. Since that time we’ve observed ICOs frenzy reaching the mountain’s high when token offerings have turned into a multi-billion industry. Moreover, we’ve devised a new type of security token sales that puzzles financial watchdog even more. All that has been done with minimum regulations.
Although today the number of ICOs entering the market has significantly dropped and many unfortunate investors have already lost their capital investing in scams, the SEC insists that it is never too late to adjust a regulatory machine to protect those who still eager to become a part of crypto-reality.
Crypto Mom Says “It’s Time to Be Clear”
Until today the core issue of a consistent regulatory framework for cryptos is unclarity. Neither authorities are definitely certain about whatsoever they are dealing with, nor investors do understand the disparity between different types of digital assets.
The situation became even worse when Security Token Offerings have been brought onto the stage and now regulators truly admit that they need some time to sort things out and elaborate effective approach to prevent industry frauds.
At the time, the commission has been using the Howey test to determine whether an asset is a security or it is not; however, with the increasing complexity of modern token offerings, the running criteria is proved outdated.
The prominent SEC commissioner that gained vast popularity because of her passion for cryptos, Hester Peirce said that the commission has to revise its standards for securities assessment when treating token sales.
She explained her point says that a decentralized token distribution does not mean that all the money collected during a fundraising event are actually owned by a single issuer, instead the capital is allocated between numerous token-holders. It follows that the concept of token sales largely differs from traditional public offerings, therefore it has to be regulated differently while the Howey test is overbroad.
Supplemental Guidance Enhances Howey Test
As a turnkey solution, Peirce stated supplemental guidance that is currently being developed by the SEC staff. According to Peirce the guidance is set to help firms and companies to pave their way through legal ICOs. It will also help projects aiming at token offerings to define the real nature of underlying assets.
Notably that previously the SEC has announced similar intentions to issue ICOs guidance in laymen terms for industry beginners. However, the terms were not disclosed. This time Peirce also did not mention the exact moment when the guidance will face the public, yet she said that investors should not hold their breath waiting for the SEC.
Considering that the financial market is awash with brand-new Security Token Offerings, also known as STO, that are gradually replacing ICOs with a safer and more stable substitute, the SEC regulators need more time to figure out this new model of token offerings and include it into their guidance.
After all, Peirce stressed that the commission needs time for careful research on the digital economy so the proposed guidance will be full and clear and it will truly foster digital transformation instead of stifling it with rigid but fast regulations.
While regulators take their time to dive deep into the concept of Security Token Offerings, you can check our comprehensive STO guide. Coinspeaker keeps you up with the latest Security Token Offerings in STO Calendar.