Posted May 31, 2019

Financial technology advocates are seeking an answer from regulators on when things like digital tokens should be deemed to be securities, and they’re gaining a sympathetic ear in Congress.

Further clarity from regulators would encourage more U.S. growth in digital assets, the advocates say.

At issue is a new method of raising capital that’s come to prominence in the past few years: the initial coin offering, or ICO, in which investors buy digital tokens from an issuer seeking to raise money for some project. For many of these offerings, the “coins” are meant to eventually act as credit entitling the investor to a product or service, sometimes even in a form that’s independent of the issuing company.

With the rise of these coins, securities regulators have had to determine how they fit into an existing regulatory structure, with the Securities and Exchange Commission saying they largely fall under federal securities law because their value can fluctuate like a speculative investment. Whether the regulators will change that view is still an open question.

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