April 03, 2019

FinHub, which is SEC's Strategic Hub for Innovation and Financial Technology, published a framework for analyzing whether a digital asset is offered and sold as an investment contract, and, therefore, is a security. The framework is not intended to be an exhaustive overview of the law, but rather, an analytical tool to help market participants assess whether the federal securities laws apply to the offer, sale, or resale of a particular digital asset.

This framework represents staff views and is not a rule, regulation, or statement of SEC. The staff recognizes that determining whether a new type of financial instrument, including a digital asset, is a security can require a careful analysis of the nature of the instrument and how it is offered and sold. As financial technologies, methods of capital formation, and market structures continue to evolve, market participants should be aware that they may be conducting activities that fall within the SEC jurisdiction. For example, market participants may engage in activities that require registration of transactions and persons or entities involved in those transactions. Even if no registration is required, activities involving digital assets that are securities may still be subject to SEC regulation and oversight. The information in this framework may apply to entities conducting the following activities related to digital assets:

  • Offering, selling, or distributing
  • Marketing or promoting
  • Buying, selling, or trading
  • Facilitating exchanges
  • Holding or storing
  • Offering financial services such as management or advice
  • Other professional services

Depending on the nature of the digital asset, including what rights it purports to convey and how it is offered and sold, it may fall within the definition of a security under the U.S. federal securities laws. If after applying the framework, market participants have questions on whether a particular digital asset is a security, they are encouraged to reach out to the staff.

 

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Keywords: Americas, US, Banking, Securities, Regtech, Crypto Assets, Digital Assets, Finhub, SEC

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