SEC Token Safe Harbor Releases Water for Fish Farming——Research on Blockchain Listing Mechanism and Act (1)
The Huge Significance of Coinbase’s Listing
The blockchain exchange unicorn Coinbase officially landed on Nasdaq, causing huge repercussions from the traditional financial and blockchain fields. At the initial stage of listing, the total market value exceeded 65 billion US dollars. You must know that Coinbase was established in 2012, and in 2015 it began to fully enter the exchange business. In just a few years after he obtained the first formal license of the digital currency exchange in the United States, he obtained strategic investment from leading financial institutions such as the New York Stock Exchange, and grew extremely rapidly.
The listing of Coinbase is of great significance, because the listing of exchange companies must face the complex financial license system and strict and cumbersome legal framework, which is far more complicated than ordinary blockchain organizations. Coinbase's ability to come through step by step in this way undoubtedly gives space to the imagination of many blockchain projects. In this long and arduous process, the support of the founding team, investment institutions, regulatory authorities, etc. is naturally indispensable. We will use this as a case study in the future. But what we want to discuss now is the decisive role played by government departments in the escort.
The listing of Coinbase undoubtedly passed the approval of the SEC (US Securities and Exchange Commission) at various levels, and obtained all licenses within its framework. The U.S. Securities and Exchange Commission is an independent quasi-judicial agency directly under the U.S. federal government. It is responsible for the supervision and management of U.S. securities and is the highest institution in the U.S. financial and securities industries. The U.S. Securities and Exchange Commission (SEC) has quasi-legislative, quasi-judicial, and independent law enforcement powers, which is equivalent to the highest department of a financial judiciary independent of the U.S. Congress. China's Securities Regulatory Commission is a ministerial-level institution directly under the State Council of China. It is responsible for unified supervision and management, maintenance of order, and guarantee of operation in accordance with laws, regulations and the authorization of the State Council.
The Need for Token Safe Harbor Proposal 2.0
SEC Commissioner Hester Peirce proposed as early as 2020 that legal cryptocurrency projects could enter traditional financial markets for public financing without violating US securities laws. The U.S. Securities and Exchange Commission (SEC) official has formally proposed a "Token Safe Harbor" for token projects. In April 2021, she will propose that the bill be further deepened and propose "Token Safe Harbor Proposal 2.0". This proposal can be said to open up a path for future blockchain projects to go public in the United States without disturbing the regulators and the original legal framework. In this issue, we analyze the necessity of the proposal in depth from several dimensions:
1. Qualitative digital assets
Whether digital assets, such as tokens (Tokens), can be qualified as securities when they are issued or sold requires dynamic analysis. That is to say, as the token (Token) circulates in the blockchain field, its value manifestation determines whether it can be characterized as a security. This is why we often wonder why blockchain projects pay so much attention to: liquidity (Market liquidity).
To give a few examples, Token A issued by project A in the initial stage may be issued and sold as securities because it includes contract transactions. Contract transactions in the private placement stage include issuance volume, issuance price, etc. Although it has not entered the public offering stage, it has obviously reflected Token A as a form of securities. But it is also possible for A to issue and sell outside the investment contract. For example, if previous investors believed that project A had great hype potential, they would drive up the price privately and directly sell Token A in their hands; on the contrary, investors believed that project A would undergo major changes, which would not be enough to support the operation of the project, so they collectively sold it. At this stage, it is clear that digital assets cannot be recognized as securities.
2. Conflict with the US Securities Regulatory System
For a mature and fully functional decentralized network structure, it must not depend on a certain person or organization for necessary management or business operations. So the tokens it issues and sells must be distributed to potential future users and freely traded. This includes but is not limited to project programmers, market researchers, operations managers and other participants.
However, the application of the U.S. federal securities laws to the primary and secondary transactions of tokens in the form of securities will obviously encounter strong obstacles. According to the U.S. federal securities laws, assets sold and traded as securities are restricted from being traded on non-securities networks.
Some people may wonder here, isn’t the SEC not restricting over-the-counter OTC? Yes, NASDAQ is over-the-counter trading, but it refers to unlisted or listed securities that are not traded on the exchange, but traded on the over-the-counter market. The tokens of the blockchain project can not be exchanged or traded in non-securities. This obviously would not be allowed under US securities exchange laws.
3. Grace Period Mechanism
Hester Pierce's Token Safe Harbor Proposal 2.0 aims to provide a three-year grace period for initial blockchain development teams. During this period, projects that meet certain conditions are allowed to be approved for listing and continue to focus on advancing the project and developing its decentralized network without being restricted by the registration requirements of the federal securities laws. "Safe Harbor" is designed to protect token buyers, require information disclosure according to the needs of buyers, and retain anti-fraud provisions related to federal securities laws, and supervise the initial development team's token distribution within the "safe harbor" .
summary
summary
Reference link:
Reference link:
https://www.sec.gov/news/public-statement/peirce-statement-token-safe-harbor-proposal-2.0
https://news.yahoo.com/sec-peirce-updates-safe-harbor-230802431.html
