Crypto Convergence: From Decentralization to Direct Listings

Ever since U.S. Securities and Exchange commissioner William Hinman said last year that a digital asset could start out a security but cease to be one when it was "Sufficiently decentralized," token issuers and investors have been eager for a quantification of what that means.

The recent SEC action halting the distribution of Telegram's TON blockchain tokens may finally have shed light on that - just not in the way we expected.

The end result could be a new type of token financing that mirrors an emerging trend seen in traditional markets.

Last year, messaging platform Telegram funded the construction of its TON blockchain with a private placement which guaranteed future allocation of Gram tokens, which of course would be decentralized enough to not need to go through a securities registration.

In early October, it filed an injunction against Telegram and a subsidiary to halt the token issuance.

The official statement appears to focus on the for-profit intentions of the issuers and original investors, not on the nature of the token itself.

The current Reg A+ registration process, chosen by some projects as a path to broader and more liquid token distribution than the less onerous but more restrictive Reg D, is slow and expensive.

In a direct listing, existing token holders could sell them on a designated exchange without restriction.

A gesture from the SEC and lawmakers in smoothing the direct listing process for token issuers would give a welcome dose of clarity to a sector eager for direction.

Crypto finance moves relatively quickly, and a burst of token listing activity would attract attention from traditional players.