Simply put
- SEC Chairman Paul Atkins stated that ICOs related to network tokens, digital collectibles, and digital tools should not be categorized as securities.
- His token taxonomy suggests that only tokenized securities would fall under SEC supervision, allowing many ICOs to instead be regulated by the CFTC.
- This perspective hints that ICO funding could see a resurgence in the U.S. prior to any new market legislation.
On Tuesday, SEC Chairman Paul Atkins remarked that numerous types of Initial Coin Offerings (ICOs) should be considered non-securities transactions, thus outside the purview of Wall Street regulators.
“That’s what we want to encourage,” Atkins mentioned during a response to the Blockchain Association at its annual policy summit. “Those don’t fit our definition of a security.”
Atkins talked about a project he introduced last month that divides the cryptocurrency industry into four general token categories. He argued that three of them—network tokens, digital collectibles, and digital tools—should not be classified as securities.
According to Atkins, ICOs corresponding to these categories are also treated as non-securities transactions not overseen by the SEC.
He clarified that the only tokens subject to SEC oversight, particularly concerning ICOs, are tokenized securities that represent securities already under SEC regulation and are traded on-chain.
“ICO transcends all four themes,” Atkins stated. “Three of these areas fall under the CFTC, so let them manage those while we focus on tokenized securities.”
This development could significantly benefit companies aiming to raise funds through token creation and sales to investors or the general public.
ICOs gained immense popularity during the 2017 cryptocurrency surge, but the SEC imposed restrictions during President Trump’s term, filing lawsuits against various ICO publishers for selling unregistered securities.
Atkins’ comments suggest that this trend might resurface, regardless of the current market structure bill. Under his proposed categorization, most crypto tokens would likely escape SEC regulation, with oversight shifting to the CFTC, which operates in a more lenient manner, akin to several existing ICOs.
Atkins mentioned that tokens not considered securities include those associated with decentralized blockchain networks and those linked to current events, internet memes, or trends. Some even offer functional aspects like tickets and memberships.
As a result, tokens with such characteristics could be seen as viable candidates for use in ICOs. In July, Atkins indicated that the agency’s “Project Crypto” initiative might facilitate ICOs via exemptions and safe harbors.
The ongoing Senate Virtual Currency Market Structure Bill is likely to facilitate the ICO process, with industry leaders appearing eager to advance their related projects, legally or not.
Last month, Coinbase launched a new service after acquiring the cryptocurrency fundraising and token launch platform Echo for $375 million in October. Tokens created through this platform are now accessible to retail investors in the U.S.
