TheCorporateCounsel.net

A recent CoinDesk article co-authored by former Corp Fin Director Bill Hinman has some suggestions for the SEC’s crypto task force concerning actions that the SEC should take right now to regulate crypto.  Topping the list is providing guidance on airdrops:

The SEC should provide interpretive guidance for how blockchain projects can distribute incentive-based crypto rewards to participants — without those being characterized as securities offerings. Blockchain projects typically offer such rewards — often called “airdrops” — to incentivize usage of a particular network. These distributions are a critical tool for enabling blockchain projects to progressively decentralize, as they disseminate ownership and control of a project to its users.

If the SEC were to provide guidance on distributions, it would stem the tide of these rewards only being issued to non-U.S. persons — a trend that is effectively offshoring ownership of blockchain technologies developed in the U.S., yet at the expense of U.S. investors and developers.

What to do:

Establish eligibility criteria for crypto assets that can be excluded from being treated as investment contracts under securities laws when distributed as airdrops or incentive-based rewards. (For example, crypto assets that are not otherwise securities and whose market value is, or is expected to be, substantially derived from the programmatic functioning of any distributed ledger or onchain executable software.)

The article’s other recommendations for immediate SEC action include modifying crowdfunding rules to make them more crypto-friendly, enabling broker-dealers to operate in crypto, providing guidance on custody and settlement, reforming standards for exchange traded products, and implementing a certification requirement for ATS listings.

– John Jenkins