The SEC Just Released Its Long-Awaited Crypto Token Guidance

The U.S. Securities and Exchange Commission has published fresh regulatory guidance for token issuers, nearly half a year in the making.

The guidance focuses on tokens and outlines how and when these cryptocurrencies may fall under a securities classification, according to the document.

SEC Director of Corporation Finance William Hinman first revealed that the regulator was developing new guidance for crypto tokens last November, and other members of the agency, including FinHub head Valerie Szczepanik and Commissioner Hester Peirce, have repeatedly said that SEC staff was working on the document.

In November, Hinman said the "Plain English" guidance would help token issuers easily determine whether or not their cryptocurrency would qualify as a security offering.

The guidance includes examples of both networks and tokens that fall under securities laws, as well as a project which does not.

Referencing the oft-cited Howey test, the guidance highlights "Reliance on the efforts of others," reasonable expectation of profits, how developed the network is, what the tokens' use cases might be, whether there is a correlation between a token's purchase price and its market price and a host of other factors.

While this guidance has been a long time coming, and provides some legal clarity for token issuers, it is not a legally binding document, and should be seen more as a guideline.

Peirce has said in the past that staff-issued guidance does not carry the weight that guidance issued by the Commissioners would.

"Now staff guidance is staff guidance. The Commission can go ahead and bring enforcement actions anyway but staff guidance does carry a bit of weight, but I would like to do something more formal at the Commission level so people have a little bit more certainty."

While the guidance discusses securities classifications, other questions remain unanswered.