Now, as a new Chairman is coming into the SEC with a new agenda, is the perfect time for the Commission to consider afresh how our rules can be modified to accommodate this new technology in a responsible manner. The guidance is not a bright-line test, but rather attempts to strike a balance between providing a manageable number of useful guideposts while maintaining sufficient flexibility for the facts and circumstances of each network to be considered in the analysis. Third, the exit report requirement provides guidance on what outside counsel’s analysis should address when explaining why the network is decentralized.

The exit report would include either an analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will be registered under the Securities Exchange Act of 1934. Second, in response to concerns about the lack of clarity at what happens at the end of the three-year grace period, the safe harbor proposal now includes an exit report requirement. First, to enhance token purchaser protections, the safe harbor proposal now requires semi-annual updates to the plan of development disclosure and a block explorer. Three significant changes mark the updated version. There is, however, more work to be done, which is why I, as a believer in the value of drawing on decentralized knowledge, posted the safe harbor on GitHub. I am grateful for the thoughtful engagement and believe it demonstrates the need for regulatory clarity in this space. The updated version reflects constructive feedback provided by the crypto community, securities lawyers, and members of the public. The safe harbor seeks to provide network developers with a three-year grace period within which, under certain conditions, they can facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws. Earlier today, I released on GitHub, an updated version of the token safe harbor proposal that I originally suggested in February 2020.

Safe harbor provision