The Securities and Exchange Commission (SEC) proposes tightening regulations on initial coin offerings (ICO) for ready-to-use utility tokens by requiring an ICO portal to file for approval with the regulator for the issuance and listing of such tokens in both primary and secondary markets.
The SEC has organised a public consultation to gather opinions on the new regulations. The hearings are scheduled to last until June 29.
Popular ready-to-use tokens currently available for trading include Bitkub Online's homegrown KUB coin and Jay Mart's JFIN coin.
According to the SEC's statement, the regulator held a focus group meeting in March to discuss with various stakeholders, including representatives from digital asset business operators, the formulation of regulatory guidelines for ICOs for ready-to-use utility tokens.
The guidelines require licensed ICO portals to act as an intermediary. Any issuers who wish to offer and list ready-to-use utility tokens for trading on digital exchanges must ask an ICO portal to file for SEC approval on their behalf.
After receiving approval, the portal will list the tokens on the digital exchanges.
The SEC offers two tracks for approval: a fast track for ready-to-use utility tokens with specified characteristics that will be processed within 15 working days, and a normal track for other ready-to-use utility tokens that do not qualify for fast track.
Ready-to-use utility tokens that are used as a means of payment for goods and services will be disqualified from the approval process.
Issuers that do not wish to list their tokens for trading on digital exchanges and do not meet the requirements for exemption must file for approval with the SEC and sell their tokens through an ICO portal as well.
Under the guidelines, issuers must disclose information both prior to and after the offering and regularly disclose and update information regarding their tokens, especially when there's a significant change that may affect prices of the tokens, to ensure investors have sufficient information to make decisions.
The SEC will also put a limit on an affiliated person's token-holding proportion to prevent the risk of unfair actions, prohibit issuers and related persons from selling or distributing the ready-to-use utility tokens to other parties within a specified period of time, and urge all digital exchanges to improve their listing and trading rules and market surveillance procedures to protect investors.
According to the SEC's statement, these guidelines are retroactive. Issuers of every ready-to-use utility token that is currently available for trading must also comply with the regulations after they are passed.
