In a decision which could be termed as an about-face by the US Securities and Exchange Commission (SEC), a business travel company in the country can now sell tokens, revealed by a letter written by SEC to TurnKey Jet (TKJ). This is a complete U-turn by the regulatory agency which initially said that every token comes in the category of security though now it seems to have softened its initial position.
Along with the other things, the letter has a detailed outline of what conditions have led the SEC to recommend the sales of the token by not classifying it under the category of securities. One of the stringent conditions put by the SEC includes the clause of non-transferability under which TKJ will not be able to transfer the tokens outside its own wallet to any other third-party platform. The company, however, is free to the transfer tokens to its own wallet. It is indeed a hard task to limit the transferability of the tokens in case of an existing blockchain but according to TKJ’s own letter to SEC, the company said that its blockchain project is permissioned and centralized in nature, so there won’t be many issues in meeting this condition. In its submission to SEC, the company said that it is going to operate the blockchain platform which is centralized in nature and will utilize the services of third parties to meet operational requirements. These requirements may crop up in the form of smart contracts, user apps, internet tools, and management services.
Another condition put by the SEC bars the TKJ to use the proceeds of the token sales in order to develop its blockchain platform. In case the company decides to buy back the tokens, it has to do so at a discounted price. In other words, people in the company who own tokens must incur a loss if they decide against using the token.
Token vs. Security Debate
TKJ has come up with the concept of tokens in order to reduce the losses associated with a wire-transfer payment system. The use of blockchain technology will further enhance the security and help to check fraudulent transactions. The issue of private tokens, according to the airline, will help the customers to fly more often as the problems associated with the conventional payment system discourage many to take the flight. Just so you know, TurnKey operates only through two jets and it is going to add the third to its fleet very soon in future. Its major flight operations are centered in Florida. It’s important to note that TKJ is the first company that has got clarification from SEC regarding “no action” decision while other companies using blockchain are still struggling to find out a difference between a security and utility token.
SEC has no issue regarding the use of tokens until and unless all requirement listed by the regulatory authority are met by the company. SEC wants to ensure that token holders must not start making the profit out of the tokens by holding them back. As long as this primary condition is met by the permissioned blockchain, there won’t be any action from the SEC.