The proposed SEC safe harbor for crypto tokens needs a deadline for regulatory objections if it is to help secure exchange listings, wallet backup firm Vault12 argues. In a comment letter submitted Tuesday, the company proposed making qualifying transition filings conclusive for the agency after 60 days without an objection.
Key Takeaways
- Vault12 says exchanges considering VGT want assurance that the SEC will not later challenge its status.
- The company raised $17.45 million from 38 investors in 2018, but VGT has never traded on a centralized exchange.
- Its proposed 60-day deadline would retain exceptions for fraud or material misstatements.
Table of Contents
- Vault12 puts exchange certainty at the center
- What the SEC safe harbor would require
- A proposed deadline, not an adopted protection
Vault12 puts exchange certainty at the center
Vault12’s submission identifies a practical obstacle for older token projects: completing an issuer’s commitments may not persuade an exchange that a listing is legally safe. The company says exchanges it approached about Vault Guardian Token, or VGT, wanted assurance that the SEC would not subsequently determine that the original investment contract still applied.
The firm raised $17.45 million from 38 investors through agreements for future tokens in 2018. It says it has since fulfilled or formally abandoned every commitment in its white paper, yet VGT has never traded on a centralized exchange.
Vault12 argues that its circumstances closely match the proposed route out of securities treatment. Its letter also supports concerns raised by industry group The Digital Chamber.
What the SEC safe harbor would require
The safe harbor is part of Regulation Crypto Assets, a proposal the SEC issued in August. The framework would create exemptions for token fundraising and a conditional process for ending an investment contract associated with a token.
Issuers seeking to use that process would need to complete or permanently stop promised essential managerial efforts. They would also have to make no new commitments of that kind, have no intention of doing so, and submit a transition report known as Form TR explaining their conclusion.
Those steps would not eliminate the possibility of a later SEC challenge. Under the proposal, an inaccurate certification could lead the agency to conclude that the investment contract had not ended and that securities-law requirements continued to apply. The safe harbor would also leave other parties able to argue that a token remained subject to an investment contract or was otherwise a security.
A proposed deadline, not an adopted protection
Vault12 wants the SEC to have 60 days to object to a properly filed certification. After that period, the filing would become conclusive for the agency, subject to exceptions including fraud or material misstatements.
The company presents that change as a way to give exchanges the certainty it says the current proposal lacks. The deadline is Vault12’s requested amendment, not a protection already adopted by the SEC.
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