Blockchain technology is a crucial innovation agent in the world. We’ve seen how that technology creates new sorts of financial devices, sometimes as tokens or coins that afford new investment possibilities that resemble those that we can find in more traditional markets such as securities and Forex.
Digital assets may or may not be securities depending on the rights they grant to its owners according to the United States federal securities laws. The agency that ultimately interprets and enforces those laws is the SEC. They will decide which digital assets qualify as securities and which don’t. They’ve already hinted in the past that those cryptocurrencies that held ICOs look a lot like securities while the rest look more like money.
And how do you know if something if a security or not, when you’re dealing with assets on which SEC hasn’t decided yet? Well, strictly speaking, you can’t choose. Not on your own. But FinHub just published a framework that will help you analyze a digital asset’s characteristics so you can decide if it’s offered and sold as investment contracts usually are which would then make it a security.
FinHub’s framework is not meant to be exhaustive. But it should be of help for those investors who need to figure out if the federal securities laws apply to the financial operations (offer, sale, resale, etc.) of a given asset.
As the cryptocurrency market keeps advancing, it’s creating new methods of capital formation, financial technologies, and market structures that are moving forward all the time and that could come under SEC’s jurisdiction. For instance, some assets may need registration of transactions and the individuals or institutions involved with them. Or there could also be assets that are securities and thus must be closely watched and regulated by the SEC.
So the framework won’t tell you what SEC will decide in XRP’s case, for instance. At least not for sure. But it will give you a set of reasonable rules of thumb that will enable you to make correct financial decisions so that when SEC finally publishes its conclusions on XRP or any other pending issue related to the crypto verse, you are not caught by surprise.
It’s important to clarify that the framework doesn’t equate to the commission’s official view on anything. It’s about the Staff’s views, which are well-informed for sure, but not binding until the SEC adopts them as official positions. So while you could interpret that this or that item is approved or disapproved by the framework, that doesn’t mean that SEC actually does endorse or not until it issues an official declaration on the matter. The framework is staff guidance, nothing more.
Also, the published framework is not in competition with any of the existing laws, regulations, or rules. Those investors interested in understanding and applying the framework are encouraged to go to FinHub and review all the published materials and not just the few that seem interesting to them.
Pinning down the nature of a new kind of financial instrument can be a difficult job that requires careful analysis of the object itself and how it’s sold and offered. That’s why SEC is taking its time (some would say it’s dragging its feet) on many issues related to crypto. It’s a problematic scenario that needs careful thinking.
Disclaimer: Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.