Developing a framework for consumer tokens -
With the rapid growth in the development of blockchain technology, virtual currencies and token sales (sometimes referred to as initial coin offerings, or ICOs), token offerings came under increased regulatory scrutiny, particularly in the United States. Since the US Securities and Exchange Commission (the SEC) first started taking action with respect to token offerings, the question on the minds of many entrepreneurs and their counsel has been whether the issuance and sale of “consumer” or “utility” tokens – those designed for use by consumers on a distributed platform and not intended to constitute securities – is possible in the United States. While there appears to be a viable regulatory path to the issuance of consumer tokens that would not necessarily be viewed as “securities” subject to SEC oversight, the framework remains unclear. In this chapter, we discuss the legal issues surrounding such issuances under the US federal commodities and securities laws.
Originally published in GLI – Blockchain & Cryptocurrency Regulation 2020, 2nd Edition.
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