Abstract : The framework SEC released a lists several factors when issuers assess their tokens fall within the definition of a security, such as whether they have reasonable expectation of profits.
April 4 (ChainDD) The US Securities and Exchange Commission (SEC) released a framework to analyze whether a digital asset is offered and sold as an investment contract, namely, a security. It wishes the tool help market participants evaluate whether the securities laws are applicable for offering, sale or resale of a digital asset.
The framework lists several factors when issuers assess their tokens fall within the definition of a security, such as whether they have reasonable expectation of profits; whether value of the digital asset has direct correlation to the value of the good or service for which it may be exchanged or redeemed; whether holders use the digital asset for its intended functionality; whether any economic benefit that may be derived from appreciation in the value of the digital asset.
The framework noted that if a digital asset has a series of characteristics, it could be less likely to meet the definition of security, such as the distributed ledger network and digital asset are fully developed and operational; holders of the digital asset are immediately able to use it for its intended functionality; the digital assets' creation and structure is designed and implemented to meet the needs of its users, rather than to feed speculation; prospects for appreciation in the value of the digital asset are limited; in case of a digital asset referred to as a virtual currency, it can immediately be used to make payments in a wide variety of contexts, or acts as a substitute for fiat currency, or operates as a store of value; the digital asset is marketed in a manner that emphasizes the functionality of the digital asset, and not the potential for the increase in market value of the digital asset.
SEC said the framework is not intended to offer lawful advice but a guideline. It represents SEC staff views and is not a rule, regulation, or statement of SEC. SEC has neither approved nor disapproved its content.