The SEC Says That Crypto Tokens are Not Securities (Finally)!

Abstract

Any discussion of digital assets as securities is fraught with confusion and a lack of clarity. In the 24 months prior to writing this, the law and approach to and acceptance of cryptocurrency (“a digital unit of exchange that is not backed by a government-issued legal tender”) has changed dramatically. With the advent of cryptocurrency and blockchain, many industries have begun using cryptocurrencies to enhance their services and fund their ventures. The increase in the use of such digital assets has brought new questions to the fore. Among these questions is the issue whether a digital asset qualifies as an “investment contract,” thus triggering regulation by state and federal securities administrators. In 2019, digital assets have a number of applications beyond the traditional “investment contract,” causing the industry to wonder: when does a digital asset fall outside the scope of securities regulation? Recently through the no action letter process and in a Regulation A filing, the federal Securities and Exchange Commission (the “SEC”) has given us some guidance.