Vault12 Warns SEC Token Safe Harbor Leaves Exchanges Exposed to Enforcement

Cryptocurrency wallet backup provider Vault12 filed a comment letter on Tuesday cautioning that the U.S. Securities and Exchange Commission's proposed safe harbor fails to give centralized exchanges sufficient legal certainty to list legacy tokens ¹.

Backed by Winklevoss Capital and Naval Ravikant, Vault12 raised $17.45 million across 38 investors via agreements for future tokens in 2018 to issue the Vault Guardian Token ($VGT) ¹. Despite completing or formally abandoning every commitment detailed in its original white paper, Vault12 stated that VGT has never traded on a centralized exchange due to lingering regulatory exposure ¹.

Exchange Hesitation and the Form TR Mechanism

The SEC issued its proposed Regulation Crypto Assets framework in August, outlining conditional safe harbor terms under which a token could cease being treated as part of an active investment contract ¹. Under the proposal, issuers must terminate or complete all promised managerial efforts, commit to no future efforts, and file a transition report designated as Form TR ¹.

However, the agency's proposal permits the SEC to retroactively challenge whether an issuer satisfied the safe harbor's requirements ¹. If the regulator finds a filing inaccurate, securities rules continue to apply, while third parties also retain the ability to assert the token remains a security ¹.

According to Vault12, exchanges evaluating a listing repeatedly questioned how they could verify that the SEC would not later deem VGT subject to its original 2018 contract ¹. Echoing concerns raised by industry trade group The Digital Chamber, Vault12 recommended amending the rule to institute a 60-day SEC objection window ¹. Under that mechanism, a Form TR filing would become legally conclusive for the agency if no objection is lodged within 60 days, barring instances of fraud or material misstatements ¹.