07 May 2019 at 07:16 BST

TokenSoft ends its due diligence on law firms

After recent SEC guidance, TokenSoft is accepting clients from broader set of law firms as market sees tokens as "regulated instruments.”

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Following recent guidance about security token regulations from the SEC, TokenSoft Inc, the digital asset issuance and management platform, has announced that it no longer restricts clients to use one of its previously vetted and approved law firms.

Due diligence

"When we launched TokenSoft, we were well aware that the legal landscape was new to blockchain-based issuances of securities. In order to mitigate legal risks, we decided to perform due diligence on a select group of law firms that shared our conservative view that digital assets should follow securities regulations," said Mason Borda, ceo of TokenSoft. He explained, “In retrospect, doing this helped protect our clients and encouraged them to take a more conservative approach, which has paid off given that the regulators now echo much of this sentiment. When issuers come to us today as their technology partner for a compliant issuance, they typically have already engaged a law firm for their project, and if their counsel carries the SEC's perspective, we don't want to be a reason for changing that important relationship.”

Regulated instruments
The SEC recently issued the framework for “investment contract” analysis of digital assets, which gave the market more specific guidance from which to work. In addition, most larger global law firms have created blockchain practices with attorneys with pedigrees in traditional financial securities, banking, and tax regulation. TokenSoft says its sense is that market participants, including legal advisers, are now commonly taking the position that tokens are regulated instruments. The market also has the benefit of seeing an increasing number of use cases from which to learn. Mr Borda said, “For our business, this means that we are less concerned that attorneys may allow their clients to adopt an interpretation of the regulations which carries higher risk. Now, we can serve a broader client base due to this common understanding that comes from clearer regulatory guidance.” As 2019 progresses, TokenSoft says it is seeing steady interest from institutions and enterprises looking to issue asset-backed tokens or digital securities.

 
   
 
 
 

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