SEC Commissioner Hester Peirce proposed a 3-year grace period for ICOs. The so-called “CryptoMom” has suggested this solution to allow crypto projects to develop before they have to pass the Howey Test to determine whether or not they are a security.
It is possible that this proposal has to do with projects like that of Telegram, which, for the moment, is strongly opposed by the SEC, given that it is specifically focused on decentralization.
Peirce’s goal is to give some time to crypto projects that launch their own tokens in order to develop their network and their community before they have to worry about the strict regulations that concern them.
According to this proposal, during the grace period the tokens would not undergo the securities test, allowing the project to reach a level of decentralization sufficient to pass the Howey Test.
The reference to Gram would seem decidedly evident, given that Telegram has declared that it is creating a decentralized platform which, once established, will not entail any obligation or responsibility on their part.
If this is the case, then Telegram’s project will not be subject to the control of the SEC, whereas to date it seems that the American agency is hindering the Gram project precisely because it deems it subject to its own jurisdiction.
In other words, some tokens may look like securities at the time of launch, but over time they may evolve to the point where they no longer do.
An example in this sense could be ETH itself, so much so that the director of the Corporation Finance of the SEC, William Hinman, already in June 2018 said that ETH no longer seemed to be a security, but it probably was at the time of launch.
Even the President of the SEC, Jay Clayton, seemed to approve this point of view, namely that digital assets can at some point evolve and cease to be a security.
Another example of this is the EOS token, given that the very SEC last year stated that although the original EOS ERC20 token was security, the final EOS token of the project was not.
Peirce said in this regard:
“The application of the federal securities laws to these transactions frustrates the network’s ability to achieve maturity and prevents the transformation of the token sold as a security to a non-security token functioning on the network”.
The concrete hypothesis, therefore, would be that of a new regulatory framework that provides rigorous requirements for crypto projects that raise funds through the sale of tokens, but excluding, for the first three years, the test whether or not they are a security.
This would allow the definition of an initial development team, which will manage the development of the network in the first three years, to then evolve into a decentralized network not controlled by a single subject.
Only at the end of the period of grace would the Howey Test be carried out to verify whether the token is a security or not.