HYPE+9.73%
Crypto
Controversies over Libra Widen the Gap Between Cryptocurrencies and Security Tokens
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Security tokens have always been offered as the regulated, compliant alternative to ICOs and cryptocurrencies more generally. The current controversies over the Libra demonstrate this in full.
The hype surrounding security tokens is surely building in the background. With the Libra taking heat from the highest levels of power in the United States and elsewhere, regulators will finally have to decide: what is exactly a digital security?
For those in the security token industry, this question is still elusive. Frameworks vary based on which country you are issuing the token from. This could make liquidity especially difficult, although there are multiple platforms trying to tackle this problem already. The single-best definition of security tokens from the SEC in the past year has been deducing what they are not. The SEC’s recent crackdowns provide us with many hints, but still, no concrete conclusions.
We did receive one clarifying document, however, back in April of this year when the SEC issued some concrete guidelines on the question. Still, the guidelines were “not intended as an exhaustive overview of the law, but rather, an analytical tool…” Having a clear framework for security tokens is, in short, going to be an uphill battle. And it will be even harder to connect the varying regulatory regimes of different nations into one cohesive system.
However, the Libra may force the government’s hand in clarifying this question. Already, lawmakers are scrambling to define the Libra and even curtail it in some cases. Just yesterday, US Treasury Secretary Steve Mnuchin added fuel to the fire by criticizing the Libra for not meeting basic regulatory requirements.
Overall, the controversy surrounding the Libra will only benefit the security token industry: we could finally receive a concrete answer on “what is a digital security?”
Do you agree that the Libra could force the government’s hand to finally decide on a concrete definition of a security token? Let us know your thoughts below.
Image courtesy of STOblock.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
