SEC Commissioner Amy Starr, along with Chairman Jay Clayton answered the ‘securities or utility’ question in a panel meeting in Atlanta. She stated that it was based on a spectrum which depended on facts and circumstances.
She began by saying that the title of the token does not matter, as the SEC will “look at what it is”. She also added that if what it was satisfied the Howey Test for investor contracts, it will be declared a security.
On utility tokens, she said:
“If it’s something that you are buying and are onlt going to use in an already existing platform, that you are bound to use, then I would say that token is a use token which may not have the characteristics of a security.”
She also emphasized the SEC’s focus on facts and circumstances, as she called these “key”. These facts and circumstances will be the determinant for whether or not the token is a security or if it’s being developed for a platform. In case of the latter, if the token goes through a presale and if it is only used on a platform with no secondary market trading, it will be declared a utility.
“There’s a spectrum, and where you fall on the spectrum will depend on the facts and circumstances of what you are.”
This is slightly contradictory to what the SEC has stated in the past, with Jay Clayton stating that most ICOs are securities in an interview with CNBC. He said:
“Thats our job [regulation] and we’ve been doing it for a long time. If its a security were regulating it. We’ve built a 19 trillion dollar economy on these rules…a securities market that’s the envy of the world.”
This could signify an ease in pressure for the regulation of cryptocurrencies. This pressure from regulators is a reason many quotes for the avoidance of institutions towards the cryptocurrency market. While cryptos stay in the grey zone, for now, statements like this by the SEC may imply a change in the regulatory framework in the near future.
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