Updated on:11/26/2025 01:37 PM 
Last week, SEC Commissioner Hester Peirce
To delve deeper into the implications of this proposal, CryptoSlate spoke with Harrison Hinkes, co-founder of Planet Blockchain and an adjunct professor at NYU Stern School of Business. Recognized by CoinDesk as one of the Most Influential People in Blockchain in 2017, Hinkes is also a practicing attorney at Carlton Fields, part of its National Blockchain and Digital Assets practice. Here's his expert analysis.
How critical is this safe harbor proposal, and what does it signify for the evolution of the crypto industry? Hinkes affirms its importance:
"It's significant. While a single Commissioner's statement doesn't make law, it signals that the SEC is taking the industry seriously and that some within the agency are considering practical solutions to the complexities of token sales for network development."
He elaborates on the potential shift in regulatory mindset:
"If adopted, this innovation could signal a policy pivot from 'How do we apply securities laws to protect investors in token sales?' to 'How do we allow networks to develop their functionality and utility without securities law hindering progress?' Until it's formally adopted as a Rule, however, it remains just one Commissioner's proposal."
The proposal's core mechanism would allow token issuers to sell their assets without violating securities laws by enabling them to "transition" out of being classified as a security. However, there are important caveats.
Is this a novel concept- that #crypto networks needing to raise funds to bootstrap towards a non-asset-focused purpose must "transition" past being a security to become a product/network with a non-investment utility?
— Harrison Hinkes (@propelforward) Feb 7, 2020
Hinkes provides further clarity:
"The proposed rule would create a safe harbor allowing an issuer to sell tokens without falling under the securities laws, as long as they maintain truthful disclosures of material information and achieve 'network maturity' as defined in the proposal. This would permit issuers to create secondary markets for their tokens without the cost and restrictions of securities compliance. This is highly favorable for new projects, though it wouldn't be retroactive, so it wouldn't aid existing issuers."
In this context, Hinkes notes that ongoing lawsuits against projects like Ripple and TON for unregistered token sales "may seem disconnected or contradictory," as this safe harbor could have legitimized their fundraising efforts at the time.
A closer look at the proposal reveals a challenging burden for projects: they can raise funds akin to securities but must achieve "network maturity" within three years. What is the fate of projects that fail to meet this deadline?
"There are several unanswered questions in the proposed rule," Hinkes confirms. "For instance, what happens to projects that can't develop a 'mature network' in three years? What are the repercussions for their token holders? How will 'decentralization' and 'functionality' be objectively measured? What if an issuer needs to pivot the project's direction entirely?"
These uncertainties highlight the complexity of aligning technological innovation with regulatory frameworks. Hinkes adds:
"Furthermore, the proposal suggests that source code would be published. How frequently must it be updated to reflect development progress? The rule also appears to favor on-chain governance over forks for network evolution, which could be seen as a policy preference for certain existing architectures over others."
Whether the Commissioner's proposal will translate into actual regulation is uncertain. "It's difficult to predict the next steps. Rulemaking is a lengthy process involving multiple opportunities for public comment and several rounds of internal review by the SEC staff and Commissioners. Some rules are adopted in seven months; others take years. Of course, many proposals are never adopted as final rules."
Crucially, it's important to remember that 'CryptoMom' Hester Peirce is nearing the end of her term at the SEC, which expires in June 2020.
Hinkes concludes with a final thought:
"It remains to be seen if this proposed rule will be adopted this year, or if it will be shelved if she is not reappointed for another term."
Despite the uncertainty, he confirms with conviction, "it's certainly one to watch."
