By Securities and Exchange Commission April 8, 2019 by renholding. (Interestingly, the Framework includes this both here and under the “Reasonable Expectation of Profits” section. But, not only is the Framework the best insight we have so far into the minds of the people who will be making real-world enforcement decisions, there’s also a real possibility that courts will adopt the Framework’s analysis and turn it into law. (3) Marketing matters. In the latter section it’s included as “[p]urchasers reasonably would expect that an AP’s efforts will result in capital appreciation of the digital asset.” I believe it belongs better in the “expectation of profits” section but its presence in the “efforts of others” section reminds us that this is all about [reasonable] purchaser expectation. What’s more interesting than the assertion that “‘common enterprise’ typically exists” in digital asset scenarios, is the explanation that the SEC would prefer us the think about the Howey test as a two-prong test: (1) Investment of money with (2) reasonable expectation of profits to be derived from efforts of others. This is something of a sticking point for some crypto advocates and attorneys, who are disappointed that the framework (a “nothingburger,” as attorney Preston Byrne put it) doesn’t give them much to rely on. Digital assets meant to be “virtual currencies” that can be immediately used to make payments in a wide variety of contexts, including paying for goods and services without needing to convert the virtual currency to another currency. Market participants are encouraged to review all the materials published on FinHub. SEC Releases Framework for Digital Assets Guidance intended to help investors determine when a digital asset is a security. I. Notably, the SEC digital assets framework doesn't equate to the commission's official view on anything. The SEC’s digital asset framework was written mostly by Director Hinman (made famous by his 'ether may not be a security' speech last summer) and Valerie Szczepanik (she heads up the SEC's digital asset division). Link to the SEC press release (includes relevant links). In fact, it’s hard to imagine how a sale of a digital asset would not satisfy the “investment of money” element, and it therefore makes sense that, when facing a lawsuit or enforcement action, digital-asset developers often concede this point (see, for example, a court opinion from a lawsuit involving ATB Coin, where the defendants argued that ATB Coin was not a security, but conceded that the sale of the coins involved an “investment of money”). SEC creates framework for analysis of digital assets. Blockchain, Digital Assets, Digital Currency, Regulatory Guidance, SEC, Tokens On April 3, 2019, the Securities and Exchange Commission (“SEC”) released the “Framework for ‘Investment Contract’ Analysis of Digital Assets” (the “Framework”). The Securities and Exchange Commission of Pakistan (SECP) is reportedly working towards introducing a regulatory framework for cryptocurrencies, according to a new document published this week. 1. The Framework only briefly addresses the “investment of money” element, indicating that offering and sale of digital assets are typically satisfied because the asset is exchanged for value (either government-backed currency, another digital asset, or another type of consideration). Price appreciation resulting solely from external market forces (such as general inflationary trends or the economy) impacting the supply and demand for an underlying … The Framework suggests that, over time, digital assets may evolve to a point where they are no longer securities. Asset transferabililty and the managerial / development work done by core stakeholders will mean this. The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not. This is the “main issue,” the authors of the Framework point out. To an extent, the messages promoters send to the public about digital-asset sales make a difference for purchasers’ expectations, and therefore whether an investment contract / security is involved. In order to provide more general guidance clarifying which offers and sales of digital assets constitute offers and sales of securities, FinHub published the Framework for analyzing whether a digital asset is an investment contract and whether offers and sales of such assets are transactions to which U.S. federal securities laws apply. Joe Biden’s … The framework was cobbled together by SEC Commissioners Valerie Szczepanik, Senior Advisor for Digital Assets and Innovation aka “crypto czar” and Bill Hinman, director of the SEC’s Division of Corporation Finance. This framework, like other Staff guidance, is not binding on the Divisions or the Commission. SEC Offers Framework for “Investment Contract” Analysis of Digital Assets. https://t.co/iSMDWXIyOT It merits more than a footnote to point out that the Framework “is not a statement of the [SEC];” does not constitute a rule or regulation; and, “like other staff guidance, is not binding” on the SEC. The framework is not intended to be an exhaustive overview of the law; rather, it is a tool to help market participants assess whether the federal securities laws apply to the offer, sale, or resale … The Framework has only two sentences (and a footnote) to say about the “common enterprise” element. The new document is titled the “Framework for ‘Investment Contract’ Analysis of Digital Assets” and was compiled by Bill Hinman, director of the SEC’s Division of Corporation Finance, and Valerie Szczepanik, Senior Advisor for Digital Assets and Innovation. The bottom line is that it’s likely that the reasoning we see in the Framework will drive SEC and court decisions going forward. Here’s 6 pages on what the SEC guidance means! Introduction. For example, market participants may engage in activities that require registration of transactions and persons or entities involved in those transactions. 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