Token Safe Harbor Proposal Updated, IRS Memo Addresses Bitcoin Hard Fork

This week, U.S. Securities and Exchange Commission (SEC) Commissioner Peirce (not the SEC) released an updated token safe harbor proposal, which amends her original proposal from February 2020. The safe harbor would seek to provide network developers with a three-year grace period to facilitate participation in and development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws. The updated safe harbor proposal makes three significant changes from the prior version: (1) to enhance token purchaser protections, the proposal adds semi-annual updates to the plan of development disclosure and a block explorer; (2) at the end of the grace period, the proposal adds an exit report requirement, which would include either an analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will be registered under the Securities Exchange Act of 1934; (3) the