SEC Token Sale Guidance Suggests Cryptocurrency May No Longer 'Get Such Lenient Treatment'
The guidance concerns the activities of virtual investment organization The DAO and whether the sale of "tokens" for cryptocurrency should fall under federal securities laws.
July 31, 2017 at 10:01 AM
23 minute read
The Securities and Exchange Commission's (SEC) recent guidance that federal securities laws apply to the activities of The DAO—a virtual organization that uses blockchain technology and cryptocurrency to raise and invest capital—was met with little surprise.
But while attorneys and financial experts alike expected the SEC's position, the commission's guidance left far more questions than answers. Still left to be clarified, for example, is the extent to which current and future blockchain and cryptocurrency investment activities will be regulated, and how such enforcement would take shape.
The SEC guidance concerned The DAO (Decentralized Autonomous Organization), a type of decentralized investor group, created by internet-of-things and blockchain technology company Slock.it. Through selling “tokens” to the public, who could purchase them using a cryptocurrency called Ether, The DAO invests in projects that will pay out what it calls “rewards”—essentially financial dividends—to its token-holding members.
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