SEC Proposes Crypto Rules with Decentralization Pathway
The US Securities and Exchange Commission (SEC) has proposed new rules for the crypto industry. The proposed 'Regulation Crypto Assets' would provide specific guidance for cryptocurrencies grouped under securities or investment contracts.
The SEC acknowledges that crypto tokens are considered securities if investors purchase them expecting to make returns from a central team's efforts, as per the Howey test. However, this rule presents challenges for many crypto startups in terms of filing, disclosure, and audits.
To address these issues, the SEC grants crypto projects a 'safe harbour' or exceptions to the 1933 Securities Act. To qualify, projects must comply with specific requirements, such as fundraising limits and mandatory financial audits.
The ultimate goal is for tokens to transition out of a securities classification by achieving full decentralization. Decentralization benchmarks include zero central control, independent governance, and distributed nodes.