Senate Cryptocurrency Hearing Clarifies SEC & CFTC Regulatory Positions

This morning, the Senate Banking Committee hosted the SEC and CFTC Chairmen on blockchains and virtual currencies.

Our goal at TrustToken is to build a regulatory compliant asset tokenization platform. We’ve been in collaboration with Cooley, WilmerHale, and White & Case to develop the legal frameworks that underpin TrustToken platform and TrueUSD project.

The TrustToken pre-sale and general main sale are being conducted through Sec. 506(c) of Reg. D, also known as the Rule 506 exemption. Our sale uses the SAFT structure developed by Cooley. Each investor who completes the application and accreditation process is provided a full Private Placement Memorandum, SAFT, and Offering Structure so they can make an informed investment decision.

These quotes highlight the nuanced perspectives brought by the CFTC and SEC:

J. Christopher Giancarlo, chairman of the CFTC, said:

This simple approach is well-recognized as the enlightened regulatory underpinning of the Internet that brought about such profound changes to human society. During the almost 20 years of “do no harm” regulation, a massive amount of investment was made in the Internet’s infrastructure. It yielded a rapid expansion in access that supported swift deployment and mass adoption of Internet-based technologies. Internet-based innovations have revolutionized nearly every aspect of American life, from telecommunications to commerce, transportation and research and development. [“Do] no harm” was unquestionably the right approach to development of the Internet. Similarly, I believe that “do no harm” is the right overarching approach for distributed ledger technology.

Jay Clayton, the chairman of the SEC, said:

At the same time, regardless of the promise of this technology, those who invest their hard-earned money in opportunities that fall within the scope of the federal securities laws

deserve the full protections afforded under those laws. This ever-present need comes into focus when enthusiasm for obtaining a profitable piece of a new technology “before it’s too late” is strong and broad. Fraudsters and other bad actors prey on this enthusiasm.

During the hearing, the SEC Chairman made it clear that he sees the sale of most, if not all, tokens during an ICO process as the sale of a security. These sales need to be properly registered or sold through an applicable exemption. Towards the end of the hearing, he reinforced the fact that thousands of companies conduct private placements every year and that just because a company is using tokens, rather than traditional stock, doesn’t mean they are exempt from SEC oversight.

We are glad the SEC and CFTC Chairmen advanced their positions and provided additional regulatory clarity. We will continue to conduct the TrustToken sale in a regulatory compliant manner.

DISCLAIMER: In consultation with legal counsel, TrustToken reserves the right to change the distribution schedule and/or impose additional restrictions on transfer and resale if necessary to comply with securities laws. You should also review our most recent FAQs and PPM for a more complete discussion of these factors and other risks, particularly under the PPM heading “Risk Factors.”