Hester Peirce. Photo: Tom William/CQ-Roll Call, Inc via Getty Images
Why it matters: Regulators, including the SEC, have wrestled with a gray area of digital token projects that look much like securities offerings initially, but can evolve in time into decentralized networks, as Ethereum did.
Details: Under Peirce's proposal, these projects would still have to comply with securities law to fundraise (many have used Regulation D exemptions, for example).
- But they would get a three-year grace period to become decentralized enough to no longer qualify as securities.
- The projects would also have to comply with a number of disclosures to ensure even early investors are protected and demonstrate they're truly working to build a decentralized network.
Yes, but: Questions remain — namely, whether Peirce's fellow commissioners will agree with her, and whether this could make it easier for some bad actors.
The bottom line: Per Blockchain president and chief legal officer Marco Santori: "Issuers still need [to] sell pursuant to the existing securities regs. Accredited investors still bear the greatest, early risks instead of retail investors. Disclosure requirements funnel actionable data to the regulators who need it most."