Limiting Distribution
“The current way in which regulators are viewing how securities regulation applies to tokens is generally onerous for anyone trying to build a decentralized network,” said Al-Naji. “At its core the decentralized nature of most cryptos is fundamentally incompatible with them being securities.”
If a token is classified as a security, its issuer, which will most likely be the developer of the network, would be responsible for implementing transfer restrictions. In practice that means limiting distribution to accredited investors in the U.S. and carrying out suitability checks on overseas buyers, a practice at odds with the idea of a decentralized network, said Al-Naji.
Basis’s closure could impact other stable coin projects, according to Nevin Freeman, CEO of rival project Reserve. So long as projects don’t need to use security-like tokens to buy up stable coins to maintain stability they should escape the rules, said Freeman, who said Reserve and its associated tokens won’t be classified as a security.
This article was provided by Bloomberg News.