Read the new blog post by Sergey Vasin, Investment director at Blackmoon Crypto at the Medium or directly on Steem.
It is no news that the Securities and Exchange Commission (SEC) in the USA issued a report that certain tokens might be considered securities and therefore subject to the federal securities laws where it concerns US persons. The Monetary Authority of Singapore (MAS) statement echoed the SEC move a week later On August 1st.
These statements came as no surprise to us. We at Blackmoon always knew that SEC and other regulators will treat tokens as securities when they economically execute the same rights and obligations as other types of traditional securities.
The question most frequently asked of Blackmoon is about our attitude towards the SEC ruling. Here is our view on this matter.
Firstly, to get rid of unnecessary ambiguity it is important to highlight that not all tokens are securities. In fact the crypto-token is a method used to structure a contract or an agreement. There can be many different types of contracts and agreements, for example, on delivery of services, products, providing work, charity or becoming a private club member.
Another example is a cryptocurrency like Bitcoin or Ether. These tokens do not provide rights to any asset of an organization or contractual obligations between the parties. It is used as a medium of exchange, a unit of account and a store of value, which are typical functions of the currency.
Whether a token is a security or not must be based on contractual relationships governed by the token. This point is articulated in both SEC and MAS statements, but overlooked by the audience.
Secondly, it is of paramount importance to reiterate that SEC and MAS regulations concern only US and Singapore citizens respectively when it comes to tokens that are deemed to be securities.
Finally, when evaluating tokens associated with the Blackmoon Crypto, one should distinguish between the platform tokens (BMC) and Fund tokens (FT) as defined in our White Paper.
BMC tokens
BMC tokens are the tokens of the Blackmoon Crypto Platform itself and give their holders a right to register as Continuous contributors (as defined in our White Paper) to the platform. Continuous contributors shall perform specified roles related to the continuous platform development to keep their status of contributors. one of the main roles that will be available is that of an Investment Advisor who manages tokenized investment funds created on the platform. Other roles will include platform promoters, investment analysts, legal advisors, public auditors, GR advisors. A full list of roles will be publicly available and updated as needed to reflect the current needs of the platform’s development. Continuous contributors will be able to receive a fraction of FTs from all Funds that operate on the Platform proportionally to the amount of BMC deposited by each contributor. Continuous contributors will be also able to participate in “only for members” discussions and votings on the strategy matters and future development of the platform.
Based on legal advice and opinions we gathered during the preparation process, BMC tokens will not fall under the current notion of securities by SEC based on the famous Howey test. We pay a lot of attention to that matter and are in continuous communications with US attorneys while formalizing our position.
Fund tokens
Unlike platform tokens fund tokens are going to be securities, which will comply with all necessary regulations.
When it comes to the US market, tokens of several first funds will be either prohibited for distribution in the US or will be sold only via licensed brokerage firms and only to authorized investors. At the second stage Blackmoon Crypto is going to establish strong connections with regulated distribution partners in the US and apply for its own broker-dealer license. Other jurisdictions will be treated in respect to their local requirements. At the same time regulation in most countries is more flexible and less comprehensive comparing to the one in the US. So even without the US, there is a huge market for the investment managers that will choose our platform. Since 2014 Blackmoon group operates in a strongly regulated field of alternative lending. Our team has partners and makes deals in 9 countries including the US. We got used to paying attention to the legal part of the business. In each country, we cooperate with legal advisors to ensure compliance.
We understand the importance of compliance with regulation and are committed to ensuring that our work is done correctly.
Keep calm and comply.
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