The KODAKCoin backers are pointing to potential trading restrictions, should the US SEC label it as a security.
Brand Behind KODAKCoin Development
Once one of the leading brands in the film and photography world, now sees a backing from WENN Digital.
A Bit about WENN Digital
WENN Digital is a firm venturing into big data and also an AI-enabled image recognition platform.
The company is working in partnership with Kodak for the creation of the KODAKOne platform, as well as the KODAKCoin cryptocurrency. The company claims to have expertise in operations, experienced development, post licensing monetization systems, and copyright law.
Here is what the company’s CEO, Jan Denecke had to say in one of its latest tweets about KODAKCoin.
“Subject to the highest standards of compliance, KODAKCoin is all about paying photographers fairly and giving them an opportunity to get in on the ground floor of a new economy tailored for them, with secure asset rights management built right in.”
There is a matter of declaration about the nature of the KODAKCoin. Whereas, WENN Digital pitches the KODAKCoin as a utility token, its disclosure points to the fact that the US Securities and Exchange Commission may differ in its interpretation of the KODAKCoin, suggesting they are securities.
Here is the disclosure given by WENN Digital on KODAKCoin in this regard.
“While WENN Digital intends for the KODAKCoin issuable under the SAFTs to be classified as utility tokens rather than securities tokens, WENN Digital will be required to make a final determination of the tokens’ status as one or the other prior to the time that the KODAKCoin are issued pursuant to the SAFTs. In conjunction therewith, WENN Digital may decide to seek formal or informal input from the staff of the US Securities and Exchange Commission. If it is ultimately determined that the KODAKCoin are ‘securities’ for purposes of the Securities Act, the KODAKCoin will be subject to significant restrictions on resale and transfer in the absence of registration under the Securities Act unless an exemption from registration is available.”
Let us have a recap of the different types of securities / cryptocurrencies / tokens traded within the blockchain ecosystem.
Coins or Cryptocurrencies
These are the digital currencies generated via encryption techniques for regulating units of currency and verifying transfer of funds. However, they do not come under the regulatory framework of central banks.
The utility tokens divide the services into units of services that anyone can purchase for using those services. The concept remains similar to APIs. They can have different use cases including funding projects, particularly relating to infrastructure developments. They can also be sold via crowd-sales during token launches.
Tokenized securities represent shares in a business. However, these need to pass the Howey test if a business wants the SEC to consider their issued tokens as securities falling under the 1934 Security Exchange Act.
So what does Howey test contain for Tokenized Securities?
- If it is investment of assets or money?
- Is this investment in a common enterprise?
- Do the investors have expectations of profit from their investments?
- Does the profit involve efforts of a promotor or a third-party?
- Lastly, if the profits are coming from investments largely or wholly beyond the control of the investors? If the answer to this question is yes, then SEC can consider it as a security.
So what is the Big Deal about SAFTs?
There are no clear reasons behind such elaborate investigations into SEC’s probe into many of the SAFTs. However, there are apparently a lot of things that SEC wants to know about them. The government wants detailed responses, containing all the details and answers to the questions that it may have about SAFTs. Many SAFT experts consider one way out of this fiasco caused by so many questions put up by SEC. They advocate that SEC may come up with regulatory policy guidelines, helping firms conduct token sales while remaining within its regulatory framework.