United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce is known for her vocal support for the crypto industry and contributions towards ensuring that newly created policies favor the emerging space.
On Feb. 6, the Commissioner took her support for the crypto space a step forward by formally proposing a safe harbor for crypto projects looking to build decentralized networks.
Hester Pierce unveiled the proposal at the International Blockchain Congress in Chicago. The primary highlight is that crypto projects who agree to work with the new framework would be allowed a three-year grace period to develop their network without the SEC regarding the accompanying tokens as securities.
Within the said grace period, the project will have developed a “decentralized or functioning network on which the token is in active use.” Achieving such decentralized status as per another statement by SEC Chairman, Jay Clayton could mean that a token issued via the blockchain qualifies for an exemption from U.S securities.
However, the promise of a safe harbor will not come without any regulatory requirements. As per Peirce’s proposal, the developer team for the project will have to make certain relevant disclosures, make their code open-source, and publish all pertinent information that potential investors need to make the right decisions.
Notably, though, projects that have once faced an enforcement action from the SEC will not qualify for the new exemption proposed by Peirce. In contrast, those who are eligible would still have to abide by anti-fraud provisions guarding the issuance of investment products.
One such anti-fraud provision highlighted by the Commissioner is that “if [the project] lied in connection with selling tokens pursuant to the safe harbour, the SEC or a state could bring an enforcement action.”
Meanwhile, although the Commissioner’s proposal has received broad support from the crypto community because of past legal actions between the regulator and token issuers, the plan would still have to garner the support of other relevant SEC commissioners before it is passed into law.