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The SEC has some questions, and it seems a16z might have some answers.

In a 50-page filing, a16z addressed the newly-established Crypto Task Force. The filing discusses various topics, including how a16z Crypto believes that the Howey Test should be applied to crypto companies and what’s necessary for a decentralized regulatory framework.

The biggest takeaway is simple: “When control is eliminated, the application of securities laws should be limited; when control is present, traditional (but modernized) approaches should be used.”

This approach is technologically neutral while recognizing that the industry requires some regulation. Regulators should aim to understand potential risks instead of basing assessments on merit.

The filing also includes classifications of tokens:
– Network Tokens
– Security Tokens
– Company-Backed Tokens
– Collectible Tokens
– Arcade Tokens
– Asset-Backed Tokens
– Memecoins

A16z Crypto noted these are the primary types they have observed in the space.

Despite the friendlier stance of the SEC, a filing explaining these classifications is necessary due to the lack of a regulatory framework and legal precedents for crypto, which could protect the industry when non-crypto individuals engage with the SEC.

For network tokens, a16z suggests a “control-based decentralization framework guidance” to distinguish between a network and a company, allowing for profit expectations tied more to network dynamics.

Additionally, guidance should clarify conditions for liquidity concerning sales by insiders, differentiating them from securities transactions. This could help prevent those in control of a network token from participating in secondary markets and leveraging information imbalances.

Asset-backed tokens correspond to stablecoins and wrapped tokens, which are likely to receive regulatory frameworks soon.

Collectible tokens refer to items like art or music, which fall under safe harbor proposals. Arcade tokens represent currency used in games or online economies, rather than traditional arcade use.