secbuilding-dec7

Is your cryptotoken a security? This new tool will help you find out.

We partnered with experts from across the open blockchain industry to demystify the specter of securities regulation for digital currency innovators.

Today we’re happy to announce the release of a new report and handy decision matrix to help crypto-developers understand the risks of becoming subject to securities regulation. Coinbase published these tools today in collaboration with the law firm Debevoise & Plimpton, Union Square Ventures, Consensys, and us here at Coin Center. 

Coin Center has been out in front of this issue for some time now. Our Framework for Securities Regulation of Cryptocurrencies has been around for about a year now, but it is intended to be a document that primarily faces policymakers, particularly those at the SEC. Until now, there hasn’t been a comprehensive resource on the subject aimed directly at the developer community.

As we have previously explained in our framework and at the Ethereum Developer Conference, there are real regulatory risks in this space but steps can be taken by developers to avoid them. We strongly believe that certain methods of decentralized token creation and development should be free and clear of securities regulation, just as are Kickstarter sales, real estate co-ops, and a handful of other investment-like purchases. 

Safer practices for decentralized token release include: 

  • Releasing tokens by mining rather than sales
  • Avoiding pre-sales that take place before development of the application or network is complete.
  • Ensuring that released tokens have a utilitarian value apart from their speculative investment value.   
  • Working loosely with a wide community of developers rather than housing all efforts under one corporate roof. 

The new report takes these and other factors and creates a scoring matrix that can help developers understand where they and their particular projects stand with respect to these laws. As always, if you’ve doubts about or confusion over the regulatory risks for your project, you should find a lawyer and seek individual advice and counsel. Tools like this, however, should help get developers on notice about these risks and maybe shed some light on why these regulations matter and should be taken seriously.

Check it out!  

Based in Washington, D.C., Coin Center is the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using permisionless blockchain technologies.