In brief
- SEC Chair Paul Atkins said ICOs tied to network tokens, digital collectibles, or digital tools should not be treated as securities.
- Under his token taxonomy, only tokenized securities would fall under SEC oversight, with many ICOs shifting to the CFTC’s lighter-touch regime.
- The stance signals a potential revival of ICO fundraising in the U.S., even ahead of any market structure legislation.
SEC chair Paul Atkins said Tuesday that numerous types of ICOs, or initial coin offerings, should be considered non-securities transactions, and thus outside the Wall Street regulator’s jurisdiction.
“That’s what we want to encourage,” Atkins said Tuesday at the Blockchain Association’s annual policy summit, in response to a question from Decrypt. “Those sorts of things would not fall, as we would define it, into the definition of a security.”
Atkins specifically referred to a token taxonomy he rolled out last month, in which he broke down the crypto industry into four general token categories. Of those four categories, Atkins argued last month that three—network tokens, digital collectibles, and digital tools—should not be considered securities in and of themselves.
On Tuesday, Atkins said ICOs pertaining to those three token categories should also be considered non-security transactions—which would go unregulated by the SEC.
The only category of token the SEC chair said his agency should regulate, when it comes to ICOs, are tokenized securities—representations of securities already regulated by the SEC that trade on-chain.
“ICOs transcend all four topics,” Atkins said. “Three of those areas are on the CFTC side, so we’ll let them worry about that, and we’ll focus on tokenized securities.”
The development could mark a significant boon for companies seeking to raise money by creating tokens and selling them to investors and the public.
ICOs were all the rage during the crypto boom of 2017—until the SEC, during President Donald Trump’s first term in office, poured cold water on the lucrative fundraising mechanism by suing numerous ICO issuers on the grounds that they were selling illegally unregistered securities.
Atkins’ comments Tuesday indicate the trend could come back into vogue, with or without a crypto market structure bill. Under the SEC chair’s proposed taxonomy, most crypto tokens would likely not be regulated by the agency. The tokens would instead be overseen by the far more hands-off CFTC—as would a slew of similarly structured ICOs, per Atkins’ comments.
The sorts of tokens Atkins has said should not be considered securities include those linked to a decentralized blockchain network; those that reference “internet memes, characters, current events, or trends”; and those that provide a practical function like a ticket or membership, among others.
Tokens with such characteristics could thus soon be considered fair game for use in an ICO. In July, Atkins said his agency’s “Project Crypto” initiative could also pave the way for ICOs via agency exemptions and safe harbors.
Though the pending Senate crypto market structure bill would greenlight an ICO process, industry leaders appear to already be racing ahead with related ventures—with or without the legislation.
Last month, Coinbase debuted a new platform for launching ICOs, after acquiring crypto fundraising and token launch platform Echo for $375 million in October. Tokens generated through the site are available to U.S. retail investors.
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