Vault12 Tells SEC Its Safe Harbor Plan Won't Convince Exchanges to List VGT

Vault12 asks the SEC for a clearer listing path

Crypto wallet backup firm Vault12 has told the U.S. Securities and Exchange Commission (SEC) that its proposed token safe harbor may not be enough to get older tokens listed on exchanges. Vault12 made the argument in a comment letter filed Tuesday.

The company raised $17.45 million from 38 investors in 2018 through agreements for future tokens. Its token, Vault Guardian Token (VGT), has never traded on a centralized exchange, which is a platform that matches buyers and sellers of crypto.

Vault12 says exchanges it approached about listing VGT wanted assurance that the SEC would not later challenge the token's status.

Key points from the letter

• Vault12 raised $17.45 million in its 2018 token sale from 38 investors.
• The company says it fulfilled or formally abandoned every commitment in its white paper, yet VGT has never been listed on a centralized exchange.
• Exchanges asked Vault12 how they could know the SEC would not later say VGT is still subject to the old investment contract.
• Vault12 proposes a 60-day window for SEC objections, after which a properly filed certification would become conclusive for the agency, with exceptions such as fraud or material misstatements.
• Vault12 says it supports a comment letter from industry group The Digital Chamber and that its concerns echo that letter.

What the SEC's proposal says

The safe harbor is part of the SEC's Regulation Crypto Assets proposal, issued in August. It would set conditions under which a token would no longer be subject to its original investment contract.

The proposal would create exemptions for token fundraising and a conditional safe harbor for ending an investment contract tied to a token. To use the safe harbor, issuers would have to complete or permanently stop promised essential managerial efforts, make no new such commitments and have no intention of doing so.

Issuers would also file a transition report, known as Form TR, explaining their conclusion, according to the proposal.

Under the proposal, the SEC could challenge whether an issuer met the safe harbor's conditions. If a certification was inaccurate, the regulator could conclude the investment contract had not ended and securities-law requirements continued to apply. The proposal also says the safe harbor would not prevent other parties from asserting that a token was subject to an investment contract or was otherwise a security.

What is confirmed

Vault12 filed a comment letter on Tuesday describing its 2018 token sale, the $17.45 million raised from 38 investors, and VGT's absence from centralized exchanges. The letter states the company's proposal for a 60-day SEC objection window and its support for The Digital Chamber's comments.

The SEC issued its Regulation Crypto Assets proposal in August, including the safe harbor conditions and the Form TR filing described above. The proposal states that the agency could challenge whether an issuer met the safe harbor's conditions and that others could still assert a token was a security.

What is still unclear

Vault12 says its sale fits the SEC's proposed path for older projects almost exactly, but that is the company's own assessment of its case. The sources do not say whether the SEC agrees, or how the agency will respond to Vault12's suggested 60-day objection window. It is also not stated which exchanges Vault12 approached about listing VGT.

Why this matters for token issuers

Older token projects that want to move out of securities treatment depend on exchanges being willing to list their tokens. Vault12's letter argues that without stronger certainty from the SEC, exchanges may stay on the sidelines even if an issuer files the required report. The letter presents Vault12's experience as an early test of how the proposed framework would work in practice.

What happens next

The SEC's Regulation Crypto Assets proposal remains a proposal, and the comment period is where feedback like Vault12's letter is submitted. The sources do not give a timeline for the SEC's next step or a decision on the proposal.

Sources

• CoinDesk