United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce, affectionately known as the Crypto Mom for her pro blockchain and cryptocurrency stance, has formally proposed a safe harbour for cryptocurrency tokens.
This proposal has been a long time in the making as she initially mentioned it back in August last year, but the formal proposal now sees her suggest a regulatory vision that makes it far easier for innovative cryptocurrency projects to try and flourish.
The primary aim of the proposal is to allow tokenized projects a three years grace period to build a decentralized network without fearing SEC legal action. It would mean that the developers need not look over their shoulder for the SEC and that they would be: “unrestrained by the registration provisions of the federal securities laws, so long as the conditions are met,” she said in her proposal.
It means not only that the building of the decentralized network is unhindered by the SEC and other regulatory bodies, but that it would also be given a chance to attract participants before they become a subject of strict regulatory proceedings.
Still subject to requirements
Of course, even though Peirce is known for her appreciation of cryptocurrency and the projects looking to build the space, the rules would not be totally cast-off in those three years. The three year grace period indicates that at the end of it, the project’s token transactions would not be securities transactions as the network matures into a “decentralized or functioning network on which the token is in active use.”
The proposal also suggests a multitude of important public disclosures such as data on source code, transactions, information on how tokens are generated or mined as well as the description of burning tokens, validating transactions and governance mechanisms.
“Although the safe harbour would preempt state securities laws, it would not stand in the way of state anti-fraud actions. If anyone lied in connection with selling tokens pursuant to the safe harbour, the SEC or a state could bring an enforcement action. We all know that there are plenty of those kinds of “projects” polluting the crypto space,” she wrote.
Big for the USA
Currently, the SEC is seen as a rather big gatekeeper for innovation in the cryptocurrency space. Not only does it regulate ICOs and other such projects, but it also runs by its own ambiguous rules. The SEC has thus far only deemed one or two coins to not be securities, leaving the rest of the market to interpretation.
These rules suggested by Peirce would not only help innovation, but they would also drive clarity in the regulatory framework.