What has happened?

A group of US Congress members has called on the Securities and Exchange Commission (SEC) to clarify its position in respect of the application of securities laws to digital tokens and cryptocurrencies.

What does this mean?

In a letter, Congress Representatives Ted Budd, Warren Davidson, Tom Emmer and Darren Soto and 11 co-signatories, asked SEC Chairman Jay Clayton to clarify the agency's approach to the treatment of offers and sales of digital tokens, arguing that the "current uncertainty" is hindering innovation in the USA and could drive business elsewhere.

The letter said:

"We believe the SEC could do more to clarify its position. Additionally, we are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught."

Although recognising that developing guidance will "take time, caution, and deep consideration", the letter then asks the SEC to clarify:

  • the criteria used to determine when offers and sale of digital tokens should be considered "investment contracts" and therefore offerings of securities;
  • whether a token originally sold in an investment contract can later become a non-security; and
  • what tools the SEC can use to offer more concrete guidance to innovators in this space.

"Any response should strive to ensure future evolution of the technology," the letter cautions.

This letter echoes a similar letter sent to the US Internal Revenue Service a few days previously by another group of Congressmen, asking it to issue updated guidance on the tax obligations when using virtual currencies.

Next steps

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