SEC Commissioner Proposes Safe Harbour Period for Crypto Startups
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SEC Commissioner Proposes Safe Harbour Period for Crypto Startups

February 7, 2020      Tarulika Jain

Hester Peirce, Commissioner at the U.S. Securities and Exchange Commission (SEC) formally proposed a safe harbor period for the cryptocurrency startups in the United States. The proposal would aid the crypto community to raise the money and build their business without worrying about regulatory laws.

Proposal of Hester Peirce (SEC)

As per the proposal of Peirce, the crypto startups will have a grace period of three years from the sale of the first token to gain enough decentralization to pass through the security evaluations of the agency. The security tests involve various assessments of the U.S. Supreme Court including the Howey Test.

Peirce detailed that some of the tokens appear to possess the qualities of security at the time of launch, but at the maturity stage, they do not maintain the same quality. Sometimes, the regulations of federal securities discourage the ability of the network to transform the token into security on the crypto network. But the new proposal provides the three year grace period to the companies to sell tokens which might not appear as security at the time of maturity.

The proposal significantly focuses on new projects to facilitate their growth. Moreover, it would only exempt the laws until the maturity period, but it will not protect projects from enforcement actions against forgery.

Need for Safe Harbour

If other commissioners of SEC will adopt the proposal of Peirce, the safe harbor can protect the token purchasers and preserve the anti-fraud provisions of the security laws.

The proposal aims to create a stringent set of conditions for the new projects, which includes the personal disclosures, code enclosures as well as many other factors to raise funds from the sale of tokens.

The proposal’s assessment guide also stated about the “initial development team”. The team will evaluate the growth of the company in three years to decide about the maturity of the network. The analysis will involve the examination of particular facts to clarify if the token is considered under a security transaction or not. The team will aim to bolster consumer protection in the crypto market. The proposal is expected to bring fresh investments into digital asset trading and facilitate network participation.

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Tarulika Jain
Tarulika Jain

Tarulika is an engineering graduate and an eloquent crypto blogger. Being a digital economy supporter, she keeps herself updated with the latest innovation in the crypto industry, Blockchain Technology, Internet of Things and other technologies. Currently, she curates the simple and interesting content for Crypto guides for beginners. If you want to learn more about the cryptocurrencies, latest trends of blockchain-powered AI applications, you are free to follow her on LinkedIn and Twitter.