U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce has formally proposed a grace period of three years for tokens. Project developers would be exempt from the federal securities laws during that time, provided that they meet certain conditions. After that, they must determine whether their token transactions involve the offer or sale of a security.
Proposed ‘Time-Limited Exemption for Tokens’
SEC Commissioner Hester Peirce announced her “Token Safe Harbor Proposal” on Thursday, calling it “a proposal to fill the gap between regulation and decentralization.” Her “Proposed Securities Act Rule 195 — Time-limited exemption for tokens” seeks to give issuers a three-year exemption from federal securities laws, allowing them to develop functional or decentralized networks.
“I find decentralized networks such a powerful phenomenon, and one that will allow society to benefit from the talents of people who — because of societal or geographic barriers — have heretofore been excluded,” the commissioner opined. Peirce is often known within the crypto community as “crypto mom,” having repeatedly advocated for cryptocurrency. She firmly believes that the SEC should have already approved bitcoin exchange-traded funds (ETFs). She has been an SEC commissioner since 2018 and her term expires this year.
SEC Commissioner Hester Peirce
While no registered token offering has been conducted in the U.S., there are currently some exemptions available to project developers, such as those provided by Regulation D and Regulation A. However, Peirce pointed out that the two routes are costly and prohibitive, making it difficult for projects’ networks to take off.
Expressing the need for her proposal, the commissioner said that many crypto entrepreneurs are trying to build decentralized networks and need to get their tokens into the hands of other people.