SEC Proposes To Determine Status Of Tokens By Howey Test
The Securities and Exchange Commission (SEC), the American regulator, has issued a guide to determine the legal status of digital tokens. An informal instruction appeared on the website of the authority, which does not legally oblige crypto issuers to anything yet, but it makes it possible to understand whether the issued assets fall into the category of securities.
The SEC proposes to use the Howey test, which has long been applied by a broad circle of investors. It is also necessary to pay attention to such matters as investing (the token has to be bought or exchanged for other assets) and the expectation of income dependent on third parties.
The following specifications do not necessarily mean that the token cannot be considered a security. However, it is noted that their presence may indicate an inconsistency with the Howey test. If a digital asset is designed for the needs of users, and not for speculation in price, if one can make a payment with a token instantly or it serves as a substitute for fiat currency, then most likely such an asset cannot be called security.
Lawyers Preston Byrne and Stephen Palley, who do business in the field of blockchain and digital currencies, responded to the SEC's recommendations. Both experts believe that the SEC has not introduced anything new concerning the legal status of cryptocurrencies. “Any lawyer … will have given advice along these lines for years”, Byrne tweeted. “… it's captain obvious territory,” Palley responded.
In March, the SEC confirmed once again that it did not consider ether security. Jay Clayton, the chairman of the department, stressed the unstable nature of cryptocurrency and called the method of its offering the main difference since ether is usually sold as an investment contract.
Earlier, a bill on fraud on crypto exchanges appeared in the US.