It took a while (5 months) for the SEC to respond, probably because they didn’t want to give these positive signals too early, while they were pursuing other enforcement actions that were already underway.
Begging the SEC for further clarity has been the industry’s crying signal for a while. In January, I enumerated 28 questions that the SEC needed to answer. Coin Center is to be commended for helping Rep. Budd draft that letter.
In my opinion, Chairman’s Clayton’s response represents a turning point in how the SEC might view tokens in the future. It is a first step, but a good one. They had been entrenched so deep against tokens as a utility for so long, such that they could only dig themselves out of that narrow hole gradually, and that was a very good first step.
What are the implications that could be interpreted from this response letter?
- The SEC has indirectly implied they didn’t move fast enough to fine token offerings that were previously a security during issuance. As time went by, tokens became in use, and networks became operational and decentralized as intended. The end-result has made their case for finding (and fining) potential violators weaker and weaker.
- The SEC acknowledged that a token can change its characteristics over its lifetime, and that’s a very important factor in accepting the novelty aspect surrounding the utilitarian role of tokens.
- They acknowledged that they are willing to react to, and become more straight forward (or change their opinion) if prompted by a political force (the letter from Rep. Budd). [But it is interesting that industry calls for the same seemed to have fallen on deaf ears.]
Did the SEC just blink? I think they did. And maybe with a wink too.
They have no choice but to become more friendly and accepting of the innovative token-based models that entrepreneurs are eager to test the grounds for.
I am hopeful that an SEC token clemency regime is just beginning.