The U.S. Securities and Exchange Commission (SEC) is planning to revisit several regulatory guidelines concerning crypto-assets, particularly the document on the application of the Howey Test to digital assets.
Mark Uyeda, Acting Chair of the SEC, announced a review and potential repeal of several existing guidelines and statements regarding cryptocurrency market regulation. Special attention will be given to the document regarding the application of the Howey Test to digital assets, which was used as a benchmark to determine whether a token qualifies as an investment contract.
In 2019, the SEC outlined principles for applying the Howey Test to digital assets. According to this test, an asset is considered an investment contract and thus a security if it involves an investment of money in a common enterprise with the expectation of profits dependent on the efforts of others. This approach was criticized by the crypto community for its excessive ambiguity and dual interpretations.
At this stage, it’s not clear what specific changes will be made to the guidelines. However, in a statement, the SEC chair noted that any new documents will be published only after a vote by the agency and in an open format. Uyeda also mentioned that the purpose of the review is to enhance clarity and relevance in the rapidly evolving digital space.
Uyeda also emphasized that the agency plans to change its approach to regulating the crypto market to account for the increasing legal complexity of cases related to token classification. The SEC intends to review recommendations related to disclosing risks associated with cryptocurrencies in the financial reports of companies.
The re-evaluation of the Howey Test’s application to crypto-assets could impact the outcome of ongoing legal disputes between the SEC and major crypto companies. Earlier this year, the regulator closed several contentious lawsuits against various crypto companies.
