dlt and iCo’s: an uPdate on eMerging regulation
Securities Section
Continued from page 44
continue, but to make sure that we’re
being consistent in how we apply
commodity law and protection of
consumers across all products.” 6
Similarly, a digital asset may
transform from a security into
a token with utility. Such utility
coins and tokens are more akin
to a license, membership, or
product. So the application
of the appropriate law hinges
on the framework outlined
by policymakers.
A digital asset may be classified
as a utility token if it is determined
that the token is not a security or a
commodity. A utility token is a
token deriving value from its utility
within a DLT protocol. The utility
may manifest itself in many ways.
MAR - APR 2018
|
HCBA LAWYER
For example, access rights to transact
on a blockchain protocol may be
treated as a licensing agreement.
A token may also represent a
product such as gas or fuel to run
applications on the blockchain.
The utility is significant because
it provides for the tokenization of
business networks through the
unrestricted exchange of tokens.
Tokenization promises to provide
a powerful tool to run innovative
digital blockchain applications for
managing business transactions and
networks. Increasingly, the SEC is
providing additional guidance
about the facts and circum stances
necessary to determine whether a
token is a security, commodity, or
a utility token. 7
https://www.sec.gov/news/
press-release/2017-176
1
https://www.sec.gov/news/
press-release/2017-185-0
3 https://www.sec.gov/news/
public-statement/statement-potentially-
unlawful-promotion-icos
4 https://www.sec.gov/news/
speech/speech-clayton-2017-11-08
5 https://btcmanager.com/
us-commodity-futures-trading-
commission-icos-transform-
commodities/
6 Id.
7 https://
www.sec.gov/
litigation/
admin/2017/33-
10445.pdf
2
Author: Gregory
M. Karch –
WorldBlock
Legal, P.A.
45