Commissioner Hester Peirce from the Securities and Exchange Commission (SEC) published a transcript of her recent presentation on the regulation of tokens and their classification as securities. She stressed that utility tokens which perform service functions within working networks should not be considered as securities.
"When the tokens are not being sold as investment contracts, however, they are not securities at all. Tokens sold for use in a functioning network, rather than as investment contracts, fall outside the definition of securities,”stated in her speech Hester Peirce.
Thus, the SEC representative separated utility tokens and security tokens once again.
She also recalled Howie's Test, which is used to determine whether a token falls under the definition of a security. A transaction can be classified as security if there is a fact of investing cash, an investor awaits profit, money is invested in a regular business, and any profit depends on the efforts of the counterparty or a third party.
To get clear classification is crucial for a large number of companies. If their utility tokens are considered as securities, the cost to achieve legal compliance will be too heavy and may force some of them to shut down businesses. In the circumstances, many projects are doing everything possible to avoid such a scenario, registering outside the USA or restricting US customers to participate in the ICO.
Nevertheless, the influence of the SEC globally is quite large. Some insist that the USA is just one of the countries in the general picture, others see it as a powerful economic empire that is strong enough to put pressure on companies all around the world.
It is worth noting that earlier this month the SEC has announced it is planning to study blockchains of leading cryptos. As it was reported earlier, the Commission is going to refine and normalize the obtained data in order to bolster efforts to monitor risks, improve legal compliance and gather information to regulate the digital assets industry.