In 2017, cryptocurrency fans hailed so-called Initial Coin Offerings, a sort of initial public offering for the Bitcoin crowd, as the future of corporate fundraising. Amid the buzz, crypto companies rushed to cash in by selling digital tokens to fans and investors.
Fearing that consumers were being fleeced, the Securities and Exchange Commission warned against ICOs and then declared such offerings amounted to an illegal sale of securities.
Now, however, one SEC commissioner is touting a plan that would permit ICO sales as long as they comply with certain rules. Commissioner Hester Peirce, who proposed the plan at a blockchain conference in Chicago on Thursday, says she wants to create a "safe harbor" that would give digital token projects three years to show that tokens they issue are not securities.
In an interview with Fortune, Peirce says her fellow SEC commissioners have legitimate concerns about the potential for fraud with token offerings. But she says that the guardrails she has proposed would protect investors while allowing innovation to flourish.
Those guardrails would require companies selling tokens to publish detailed information about their projects on their websites, including the identity of the ICO team members as well as the project's source code, transaction history, and financial beneficiaries. To avail themselves of the safe harbor, and avoid trouble with the SEC, companies would have to file a notice documents with the SEC's online Edgar system.
If Pierce's proposal is adopted by the SEC, it would address complaints by crypto supporters that the agency is stifling innovation in financial technology, and pushing entrepreneurs to leave the U.S. for places with more favorable regulatory climates like Asia and Switzerland.
“If adopted, the proposed safe harbor could be the most groundbreaking development for the U.S. cryptocurrency market to date," said Catherine Coley, the CEO of crypto exchange Binance U.S. "In the long run, it will help bring more Americans into digital asset trading and foster greater network participation.”
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