The Securities and Exchange Commission’s Strategic Hub for Innovation and Financial Technology, known as the FinHub, published a digital assets framework Wednesday to help entities involved in the space analyze whether a digital asset is offered and sold as an investment contract, and, therefore, is a security.
Bill Hinman, director of the Division of Corporation Finance, along with Valerie Szczepanik, senior advisor for Digital Assets and Innovation, stated that 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.”
The framework — which represents staff views and is not rule, regulation or statement of the commission — is part of the agency’s continuing efforts to aid compliance regarding digital assets, the two state.
The “Framework for ‘Investment Contract’ Analysis of Digital Assets,” Hinman and Szczepanik state, “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.”
Albert Lung, a lawyer with Morgan, Lewis & Bockius LLP, told ThinkAdvisor in a Wednesday email message that the FinHub framework, in general, “is a positive development because it provides some clarity in a very uncertain if not unruly regulatory environment.”
The framework “would provide companies, including many of our clients, with much needed guidance on how to design, operate and if appropriate issue and sell digital assets and tokens,” Lung added.
Hinman and Szczepanik warn that 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 our jurisdiction.”