US Chamber of Digital Commerce publishes token guidelines
The US Chamber of Digital Commerce (CDC) published late on Monday a comprehensive set of guidelines to help shape the growth of the token and initial coin offering markets.
“Understanding digital tokens: Market overviews and guidelines for policymakers and practitioners” was released by the CDC’s Token Alliance – an initiative with around 350 global participants, including blockchain and token experts and former regulators.
Three guideline areas
The guidelines focused on three main areas, starting with a regulatory overview giving a broad understanding of the securities laws and legal frameworks relating to digital tokens in the US, Canada, Australia, Gibraltar and the UK.
Secondly came the principles and guidelines for utility tokens, focusing on the responsibilities of token sponsors and trading platforms to promote sound business practices and minimize regulatory risk.
The third main area of the guidelines looked at the economic landscape and the evolution and growth of the global token markets.
Greater regulatory certainty
The paper continued to call for regulatory certainty, saying the current rules of determining whether or not a digital token was a security, and therefore requiring registration with the Securities and Exchange Commission (SEC) in the US were too broad.
SEC rules currently use the Howey Test to decide if a token is a security. The Howey Test stipulates that if “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party”, then such as transaction is a security.
“The guidelines in this report are reactive to the current regulatory state of affairs,” the Token Alliance said.
“Ideally, agencies will simplify, stabilize, and improve regulatory environments so that entrepreneurs using blockchain networks can spend less time worrying about uncertain compliance obligations and regulatory interpretations, and more time developing tokenized networks that improve peoples’ lives.”
James Newsome, co-chair of the Token Alliance and former chairman of regulator the Commodity Futures Trading Commission, said: “The Token Alliance is taking a positive and proactive approach towards working with regulators, which could ultimately create unprecedented opportunities for investment, innovation and jobs.”
Paul Atkins, chief executive of Patomak Global Partners and former Securites and Exchange Commissioner added: “These industry-developed principles are an important tool for responsible growth and smart regulation that strikes the right balance between protecting investors while allowing for innovation in this new technological frontier.”