This week, SEC Commissioner Hester Peirce put forth a new proposition dubbed the Token Safe Harbor Proposal, also known as Proposed Securities Act Rule 195 – Time-limited Exemption for tokens (“Safe Harbor Proposal”). The proposed regulation would set forth new rules regarding digital assets and their classifications. As such, the proposal could represent a dramatic shift in the US’s policy on crypto currencies.
Commissioner Peirce released her new Safe Harbor Proposal at a speech held in Chicago on Feb. 6. In her discussion, she explained the nuances of the Safe Harbor Proposal. Peirce laid out various examples as to why the US needs to focus more on the regulation of digital assets that may not be deemed as securities.
During the speech, the Commissioner set out her vision for a new course for compliant blockchain projects operating within the US’s borders. During the discussion, Peirce pointed to the lack of transparency surrounding the token taxonomy currently in place. She explained that this opaqueness has hurt the US blockchain sector in many ways.
Lack of Transparency
For one, the SEC’s approach has undermined innovation within the space. Many firms are unsure of the SEC’s next maneuvers in terms of classifications and enforcement. This opaqueness has caused startups to seek out friendlier shores to base their operations.
On top of the classification woes, the SEC has been involved in a number of high-profile ICO cases which has further exasperated the situation. Many of these companies that the SEC pursued are now forced to return all investor funds, and pay hefty fines for their crowdfunding events. In some instances, these fines are almost equivalent to the total amount raised during the company’s funding round.
Commissioner Peirce believes that the securities laws are not a good fit for this fast-paced digital revolution. Furthermore, she expressed concerns that applying these laws to new technologies such as blockchain tech results in a detrimental mismatch. Consequently, this heavy-handed and stiff approach to the market only hurts the US economic interests in the long run.
Safe Harbor Proposal – A New Era
Commissioner Peirce proposes a new legal standard to apply towards blockchain-based projects. The Safe Harbor Proposal would create a safety window in which all tokens are able to operate and crowdfund without the looming threat of SEC retribution for the sale of unauthorized securities. During this “Safety Zone” period, tokens would function as SAFTs.
Once a token passes the safety zone time period, the project will then be put to the infamous Howey Test to see if the project qualifies as a security. At this point in the project’s lifecycle, the SEC would then make a determination on the classification of the token moving forward. In this way, the SEC can get a firm grasp on the level of decentralization the project possesses and other important aspects used in the determination of a token’s classification.
Safe Harbor – Important Details
In order for a company to qualify for Safe Harbor status, it would need to adhere to a number of stringent guidelines. For one, the company must prove that it put forth good faith in terms of creating a functioning platform. Additionally, the firm will need to show that the network created operates in a truly decentralized manner.
All companies seeking Safe Harbor status will also need to provide disclosures on a publicly available website. Here, firms will need to accurately describe their identities and experience in the space. Also, in-depth details regarding the project must be shown. These details include details about the platform’s functionality, specifics about the tokens capabilities and technical stats, the intended use of the proceeds, and the source code for the project, if available.
Liquidity is Important
All Safe Harbor-qualified projects must create liquidity in the market. This liquidity needs to come in a couple of different forms. Specifically, developers must allow purchasers the opportunity to sell their tokens to a third party. As such, the Safe Harbor Proposal envisions a number of compliant exchanges specifically set up for this task. Companies will need to provide their investors with a way to offer and sell their tokens via these compliant exchanges.
Importantly, any firms looking to take advantage of the ruling will need to submit a Notice of reliance with the SEC within 15 days of the first sale of their token. Also, the firms will need to provide proof that the funds raised did indeed go towards the development of the network in question.
SEC Cracking Down
As previously reported, the SEC continues to seek out and prosecute ICOs hosted over the last two years. In most instances, these firms violated the current securities laws. In these scenarios, the firms face charges of illegally selling unregistered securities. Additionally, the SEC started to crack down on firms for falsifying or deliberately manipulating their investor data.
Recently, the SEC alleged that the founders of the Opporty platform violated securities laws. In response, the firm’s founder Sergii “Sergey” Grybniak released an open letter to the crypto community in which he details why he feels his firm is being unfairly chosen as an example to the market. In the letter, Grybniak claims that the SEC statements against his firm exclude important facts and overstates other instances.
All About the Benjamins
Grybniak also believes his firm was targeted because of its medium size. In the letter, he states that his firm was chosen because it had a “relatively small ICO with fewer funds available for legal fees for an extended court case.” Now Grybniak seeks to present his evidence and set a precedent in the sector via his trial.
Comprehensive Approach to the Market
Commissioner Peirce has put forth a very comprehensive and well-thought-out approach to the blockchain sector. The utilization of an SEC safe harbor grace period is exactly what the market needs to continue on its path of large scale adoption. The Safe Harbor Proposal could help to spur a new blockchain revolution on US soil. In turn, the US could regain its lost positioning as the world’s blockchain epicenter.
For now, the entire US blockchain market continues to grapple with outdated regulations and confused lawmakers. Hopefully, Commissioner Price’s new approach will re-light the fires of innovation on US soil.
Flyt Property Brings First Tokenized Real Estate STO to Africa
This week marks another important milestone within the international security token sector as the African-based tokenization platform, Flyt Property announced plans to host the first-ever Tokenized Real Estate STO on the continent. The news demonstrates an acceleration in the adoption of tokenization across the global real estate market. Additionally, it symbolizes a major advancement for African markets moving forward.
According to company documentation, Flyt Property Investment will issue Africa’s first property-backed security token. Importantly, the blockchain-based token represents ownership in Flyt Property’s new real estate fund. Unlike previous tokenization ventures within the region, Flyt features full regulatory and legal compliance.
Flyt Hospitality Fund
The newly tokenized Flyt Hospital Fund focuses specifically on strategically located hospitality properties. Also, the fund will focus on sectional-title serviced apartments and student accommodations. Traditionally, this style of real estate required the participation of a major financial backer. Flyt believes that through the power of tokenization, the firm can open up these investment opportunities to a host of new private investors.
Importantly, the Flyt Hospital Fund is a South African Section 12J fund. This is a critical categorization as Section 12J investments receive tax breaks and a host of other advantages in the market. The concept of Section 12J properties first entered the market via the Income Tax Act of 2009 as a way to stimulate market growth. Importantly, South African taxpayers who invest in local 12j companies receive a plethora of benefits including a 100% tax deduction.
In a recent interview, Zane De Decker, MD of Flyt Property Investment spoke on the important maneuvers his firm has made. He explained how the new strategy places Flyt far ahead of the curve. Decker also touched on the overall excitement felt by his team. He then spoke on how the project provides new market opportunities to investors.
Decker was keen to go into some of the finer details related to the project. He described how the new services benefit both traditional and token investments. Flyt will allow both fiat and tokenized investments into the fund. Consequently, this strategy will increase the liquidity of the entire project. Lastly, Decker described why the transparency provided by the new tech is a major upgrade for the market.
Flyt Property Investment worked with the Swiss-based financial technology supplier Bakari to make the project a reality. Speaking publicly, Ciaran MacDevette, Co-Founder of Bakari, explained that the new project embraces next-generation financial technology. Additionally, MacDevette stated that Bakari was “proud” to be working with the Flyt Hospitality Fund. He also discussed the reasons why his firm continues to be a leader in FinTech innovation.
Flyt token (FLYT)
FLYT is an ERC-20 compatible token that lives on the Ethereum blockchain. As an ERC-20 compliant token, the platform enjoys some significant advantages including higher interoperability. For example, all Flyt tokens can be self-custodied by investors with only the need for an ERC-20 compatible wallet.
Flyt Property Investment
Cape Town appears to be Africa’s new blockchain epicenter. These latest developments are sure to place Flyt Property Investments in a category of their own. For now, the African markets are primed and ready for large scale tokenization.
Bankhaus von der Heydt Unveils Blockchain Strategy
This week, the German Bank von der Heyd stunned the EU banking community after revealing plans to issue security tokens and offer custodial services in the coming weeks. The news demonstrates further integration of blockchain technology among the EU’s traditional banking sector, as well as, a desire by Bankhaus von der Heydt to become the industry leader.
News of the new services first broke via a press release. In the release, the private bank shed some light on the project and the progress to date. Company documents revealed that the bank completed its first custodial transactions successfully this month. Additionally, the blog gave some insight into the bank’s future intentions.
According to reports, Bankhaus von der Heydt will provide commercial clients the ability to tokenize assets via the platform. In this way, bank officials seek to become a major force in the German blockchain sector. Additionally, the bank has plans to issue a EURO-backed stablecoin in the coming months to supplement its digital asset economy.
The new products make Bankhaus von der Heydt the first German bank to provide a digital asset custody solution to clients. As such, the firm hopes to achieve a significant strategic advantage over the competition. Discussing the new strategy Bank von der Heydt managing director, Philipp Doppelhammer spoke on his firm’s work. He explained that bank researchers spent years observing the blockchain space. This research helped the firm to design relevant products to the current state of the market.
Doppelhammer also explained why these products provide his firm with outstanding added value. As the only German bank to offer licensed digital asset custodial services, Bankhaus von der Heydt is positioned to be a major player in the EU markets. Lastly, he took a moment to let the public know that these products are now ready for the market from a regulatory and technological perspective.
In order to ensure the success of the venture, Bank von der Heydt collaborated with FinTech and blockchain services provider, Bitbond. For its part, Bitbond provided the technical infrastructure surrounding the custodial aspects of the strategy. Additionally, the bank utilized Bitbond’s proprietary technology to develop several asset structuring and asset servicing products as well.
Speaking on the partnership, Radoslav Albrecht, CEO, and founder of Bitbond explained how his firm continues to work with several banks and financial intermediaries to expand the capabilities of the platform. He also touched on the important benefits tokenization brings to the market, such as liquidity.
Additionally, Albrecht described the feeling of excitement surrounding the project. Here he pointed out that this was the first project to use blockchain technology in the area of securitization and private placements in the country. He also stated that his firm was “pleased to cooperate” with the bank, which he labeled a proven industry expert.
Bankhaus von der Heydt Takes the Lead
It now appears that Bankhaus von der Heydt will have a strong positioning in the market moving forward. This firm continues to utilize its unique stance to keep up-to-date on all the latest FinTech trends. You can expect to hear a lot more from this group as its new projects gain popularity in the coming weeks.
CFTC to Give its Stance on GRAM Token Classification
This month, the Securities and Exchange Commission (SEC) stepped up its battle against the mobile messaging giant Telegram. For months, the two groups have been enthralled in a trial to determine the classification of Telegram’s GRAM token. This week, in an attempt to break the legal stalemate, the SEC reached out to the Commodity Futures Trading Commission (CFTC) to hear its stance on the project.
According to reports, a letter was sent from the federal judge presiding over the case, Kevin Castel, directly to the Office of General Counsel of the United States Commodities Futures Trading Commission. Specifically, the letter asks the organization to determine if the GRAM token is a security or not.
As such, the importance of this document can’t be overstated. The court’s determination will have a direct effect on the classification of certain types of cryptocurrencies within the United States moving forward. For its part, the SEC argues that the GRAM token is, in fact, a security.
Regulators stated that the entire crowdfunding event, which raised around $1.7 billion, violated the Securities Act of 1933. On top of the claim, SEC alleges that Telegram participated in the unauthorized sale of securities. Lastly, the SEC also claims the group convoluted the difference between a purchaser’s investment in the digital asset and the delivery of the asset itself.
Telegram Refutes the Charges – GRAM
Despite the heavy-handed approach the SEC has taken, Telegram continues to stand its ground. The firm insists that its GRAM token is a commodity. As such, Telegram stated that GRAM tokens do not fall under the SEC’s jurisdiction.
Recent court filings shed some light on the details of Telegrams 2018 ICO. According to these documents, Telegram raised $1.7 billion from 171 investors. Of these investors, $424.5M came from 39 US-based investors. The remaining $1.28 billion in funding came from international participation from 132 additional investors.
What is the GRAM Token?
The GRAM token project originated with the goal to provide Telegram users with an online currency to supplement the Telegram platform. Developers envisioned a cryptocurrency that saw global usage among Telegram’s 300 million subscribers. According to company executives, the hope was to spur the growth of a new economy that would use Telegram as the man medium of communication.
So Are GRAM Tokens Security Tokens?
While the SEC continues to drive home their perspective on Telegram’s blockchain projects, the cryptocommunity awaits a final answer. As it stands today, several filings were made with no relevant determinations yet. Telegram executives and regulators are keen to the fact that this case would set a major precedent across the entire US blockchain sector.
When you consider the ramification of the Telegram trial, it’s easy to see why company executives are not willing to bow to the SEC’s pressure. For one, the firm has billions in funding to fight a long-drawn-out court battle. Additionally, Telegram executives have put forth a lot of effort into the creation and maintenance of the GRAM ecosystem. To lose these funds, would be a huge hit for the firm.
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