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SEC Issues Guidance on How Federal Securities Laws Apply to Crypto Assets
The US Securities and Exchange Commission (SEC) has issued new guidance on how federal securities laws apply to crypto asset-related offerings and disclosures. The move is aimed at urging cryptocurrency companies to be more transparent, particularly with regards to tokens that could potentially be considered as securities.
According to the statement released by the SEC, firms are required to clearly explain the material aspects of their business. This includes providing detailed disclosures on their business models and operations. While this guidance is not legally enforceable, it marks a significant effort by the agency to clarify how US securities law applies to crypto assets.
The SEC emphasized that offerings and registrations may involve equity or debt securities related to networks, applications, and/or crypto assets. Additionally, these offerings and registrations may also relate to crypto assets offered as part of or subject to an investment contract (such a crypto asset, a ‘subject crypto asset’).
In its guidance, the SEC is attempting to provide clarity on how these requirements apply to equity and debt securities associated with crypto assets. This includes specifying risk factors relating to issuers’ business operations and disclosures over security volatility, liquidity, and supply.
The agency has reviewed past disclosures of crypto companies, which often include information such as whether they are building a blockchain network, their progress, the network usage details, and the technology behind it. The firms have also disclosed token holder rights and how the tokens function.
SEC Commissioner Hester Pierce recently shared her views on Twitter, stating that the SEC is not currently classifying crypto assets as securities but is working to clarify this. However, if they are considered securities or the company operates in the crypto industry, the SEC has provided guidance on disclosure requirements to comply with federal securities laws.
In addition, the agency’s corporate finance division has established a Crypto Task Force to help develop clear rules for the industry, including registration and disclosure rules. For now, it is sharing its current views to guide companies.
The development comes at a time when the crypto market is experiencing significant growth and volatility.
Source: https://coinpedia.org/news/sec-issues-guidance-on-how-federal-securities-laws-apply-to-crypto-assets/
