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In Congressional Testimony, SEC Chairman says compliant ICOs are possible.

Jay Clayton appeared before the House Financial Services Committee in a routine hearing about the agency’s agenda, operations, and budget. Unsurprisingly, there were a few questions from committee members about the agency’s response to Initial Coin Offerings.

Rep. Patrick McHenry, committee vice-chairman, asked about the SEC’s recent investigative report which found that the DAO token sale was indeed an securities offering. Clayton responded:

Instead of starting with enforcement actions we decided to start by level-setting with this report and saying “hey, here’s how to behave well and here are some things that trouble us.” That was the intent of that, to notify people in the space that there are ways to do this right and some things that trouble us and if you do it right we’re all for it and if you do it wrong you’re going to have some explaining to do.

He was then asked about how entrepreneurs can use the token sale model correctly. He said to “first ask yourself if it’s a security,” and if it is, to find an exemption that fits or register as a security with the agency.

This is a key point. Many tokens are clearly securities. If yours is then then you would be best served by acknowledging that and taking steps to be compliant. However, we’ve argued that there is a certain class of tokens, those which are useful for accessing distributed network goods and services, that are not securities and should not be regulated as such. Learn more about that here.

What’s important here is that the SEC is acknowledging that there is a right way to do token sales and they don’t seem keen on quashing innovation in decentralized networks any time soon.

Watch the full hearing here.