The SEC’S New Framework
The SEC’s new framework announcement has provided both clarifications, and caused more confusion of blockchain participants. In this piece, I will not go in depth about their new Framework but highlight one potential problem and a bright spot in their announcement last week.
Bright Spot:
They do a really good job of using examples of what type of tokens would be considered security or not. If a token has a pure utility function on a website or platform then the SEC will consider it a utility token-not a security. For example, EOS tokens are key in being able to execute smart contracts on the EOS network-hence it’s a utility token. However, if there is an assumption of increased value than they will view your token as security. For reference, make sure you fully understand how the Howey Test works.
Problem Spot:
An AP, or active participant, is critical in whether a token is to be considered security or not. The definition of an AP is very vague. An AP could be a Smart Contract Engineer, Founder, Community manager, or basically any active person involved with managing the underlying network or protocol. The issue here is that their definition is very vague and not specific enough to point out specific types of active participants of a protocol (or network).
The impact a software engineer, community manager, or operations manager may have on a blockchain is vastly different and leaves too much room for interpretation.
I strongly advise reading the SEC’s new Framework and checking out some popular commentary from Katherine Wu.
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