The proposal is a nuanced attempt to square the circle at the heart of crypto network funding. The quandary goes something like this: If the token for a new network is classified as a security from the start, only institutional players and venture capitalists will be able to buy it. That makes it less likely that the network will have a truly decentralized user base or development community. On the other hand, you can’t give crypto carte blanche on securities regulation or you’ll wind up with rampant fraud, as we saw during the initial coin offering (ICO) boom in 2017.

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