In recent years, following the launch of the Bitcoin network, offers of digital assets have been made to investors in the United States. Historically, the US Securities and Exchange Commission (SEC) has suspiciously viewed and investigated these transactions on the assumption that the offer of digital assets (also known as 'tokens') constituted an offer of securities. On several occasions, the SEC found that those offerings had been conducted in violation of US securities laws.
In the past, the SEC viewed cryptocurrencies like Bitcoin and Ether as non-securities in light of the decentralized nature of their networks, which excluded the existence of a central party whose efforts could be a key factor in the enterprise. On April 3, 2019, the SEC, through its Strategic Hub for Innovation and Financial Technology (the 'FinHub'), released a framework (the 'Framework') for analyzing whether a digital asset is a security. In particular, this framework provides guidance on whether a digital asset is an investment contract under Section 2(a)(1) of the US Securities Act of 1933.
The Framework has found application in practice already. On April 3, 2019, the SEC released its first 'no-action' letter regarding an offering of tokens, requested by TurnKey Jet, Inc., and on April 11, 2019, Blockstack Token LLC filed a preliminary offering circular under Regulation A of the Securities Act for the offering of tokens of its network.
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