What is the practical token of compliance in the eyes of the SEC? Interpretation of the key points of the SEC reply (with Chinese and English full text)

The US Securities and Exchange Commission (SEC) officially publicly replied yesterday that TurnKey Jet (hereinafter referred to as TKJ), a company engaged in aircraft charter services in Florida, raised funds through the issuance of blockchain-based tokens. The behavior was replied, officially confirming that the token issuance and fundraising activities are not subject to the securities issuance that the SFC needs to supervise.

This is the first response from the US Securities and Exchange Commission to the so-called "no regulatory action" against blockchain tokens. The original English text of the letter is at the end of the text. The Chinese translation of the translation chain (public number: Liu Jiao Chain) is above the English mail.

Let us first talk about a few issues that are particularly emphasized in the letter from the US Securities Regulatory Commission (hereinafter referred to as the SEC) and see what kind of inspiration will be given to us.

Some inspiration

First, the SEC requires that TKJ's funds raised through the issuance of blockchain tokens cannot be used to develop their systems, platforms and applications. In other words, TKJ must first raise funds on its own, develop the system and services, and start to serve the outside world before it can issue tokens.

This avoids the risk of air currency running by the project party after a large amount of white papers are collected at the end of 2017 and early 2018.

So in this way, as the SEC pointed out, the tokens purchased by customers can be exchanged for the corresponding services immediately.

Then, in terms of liquidity, the SEC stressed that TKJ's tokens can only be transferred around in its own wallet software, and not allowed to go to other wallets outside their platform (such as the exchange's wallet).

In other words, this token is a token that flows within the system and cannot be placed on the exchange to speculate.

The SEC pointed out that each token is an obligation of TKJ to provide customers with a one-dollar equivalent service. TKJ can only value the value of modern currency by providing services. If TKJ wants to buy back, it can only buy back at a price of less than one US dollar TKJ, instead of allowing high price repurchase, to avoid TKJ manipulation price rise and fall, and guide customers to expect the appreciation of the token.

This has caught TKJ's own manipulation of the currency price, tricking customers into investing in tokens.

Finally, the SEC made it clear that TKJ's token sales promotion can only say that this is a token with usage function [teaching chain (public number: Liu Jiao chain) Note: Probably similar to the metal token of the doll machine] It is strictly forbidden to claim that the token has the potential for appreciation.

In other words, since you are a utility token, you are not allowed to say that you have the added value of stored value.

Four words: the currency is not used .

Mail Chinese translation

Section 2(a)(1) of the Securities Act of 1933

Response from the Corporate Finance Regulatory Division on April 3, 2019

Re: Letter from TurnKey Jet on April 2, 2019

Based on the facts, based on your opinion that the token is not a securities, the company will not recommend that the SFC take regulatory action if TKJ does not file and sell tokens in accordance with the provisions of the Securities Law and the Exchange Law. Capital abbreviation [teaching chain (public name "Liu Jiao chain") Annotation: refers to the TKJ three-letter abbreviation] has the same meaning as the definition in your letter.

In the process of reaching this position, we specifically pointed out:

TKJ will not use any funds from token sales to develop the TKJ platform, network or App, and all of the above products have been developed and operated while any tokens are being sold;

Tokens can be used immediately for their intended function (purchase charter service) while being sold;

TKJ will restrict tokens to only TKJ wallets and not to any wallets outside the platform;

Throughout the life of the project, TKJ will sell tokens at a price of $1 per token, and each token will represent an obligation of TKJ to provide charter services at a price of $1 per token;

If TKJ makes a token repurchase, it can only repurchase from the holder at a discounted price that is lower than the face value ($1 per token), unless the US court orders TKJ to clear the token;

Tokens should emphasize the use of tokens in the way of marketing and promotion, rather than the potential for token market value growth.

This position is based on the statement you wrote to the company's letter. Any different facts or circumstances may lead the Division to draw different conclusions. In addition, the response only expresses the position of the Division regarding regulatory actions and does not represent any legal conclusions regarding the issues mentioned.


Jonathan A. Ingram

Chief Legal Counsel, FinHub

Corporate Finance Supervision Department

Mail original English

Securities Act of 1933

Section 2(a)(1)

April 3, 2019

Response of the Division of Corporation Finance

Re: TurnKey Jet, Inc.

Incoming letter dated April 2, 2019

Based on the facts presented, the Division will not recommend enforcement action to the Commission if, in reliance on your opinion as counsel that the Tokens are not securities, TKJ offers and sells the Tokens without registration under the Securities Act and the Exchange Act. Terms have the same meanings as defined in your letter.

In reaching this position, we particularly note that:

TKJ will not use any funds from Token sales to develop the TKJ Platform, Network, or App, and each of these will be fully developed and operational at the time any Tokens are sold;

The Tokens will be immediately usable for their intended functionality (purchasing air charter services) at the time they are sold;

TKJ will restrict transfers of Tokens to TKJ Wallets only, and not to wallets external to the Platform;

TKJ will sell Tokens at a price of one USD per Token throughout the life of the Program, and each Token will represent a TKJ obligation to supply air charter services at a value of one USD per Token;

If TKJ offers to repurchase Tokens, it will only do so at a discount to the face value of the Tokens (one USD per Token) that the holder seeks to resell to TKJ, unless a court within the United States orders TKJ to liquidate the Tokens ; and

The Token is marketed in a manner that emphasizes the functionality of the Token, and not the potential for the increase in the market value of the Token.

The difference is based on the representations made to the Division in your letter. Further, the response expresses the Division's position on enforcement action only and does not express any legal conclusion on The question presented.


Jonathan A. Ingram

Chief Legal Advisor, FinHub

Division of Corporation Finance

# references

[1] Turnkey Jet's official website: https://www.turnkeyjet.com/

[2] SEC English mail original link: https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-jet-040219-2a1.htm

[3] SEC Organization Structure: https://baike.baidu.com/item/%E7%BE%8E%E5%9B%BD%E8%AF%81%E5%88%B8%E4%BA% A4%E6%98%93%E7%9B%91%E7%9D%A3%E5%A7%94%E5%91%98%E4%BC%9A/7144354

[4] Wall Street Journal report: https://www.wsj.com/articles/private-jet-cryptocurrency-gets-pass-from-sec-11554325520

[5] Coindesk's report: https://www.coindesk.com/secs-first-crypto-no-action-letter-took-11-months-to-secure