Several venture capitalists (VCs) and entrepreneurs have been petitioning federal authorities to see certain virtual currencies in a “different light.”

Right now, many cryptocurrencies are in danger of being classified as “securities,” which would place them under strict regulatory scrutiny. Working to change this, venture capital firms Andreessen Horowitz and Union Square Ventures have gathered a team of lawyers and investors known as the “Venture Capital Working Group” to meet with the U.S. Securities and Exchange Commission (SEC) to develop what they call a “safe harbor” for specific digital currencies and establish long-term proposals for how they should be viewed and handled.

The New York Times alleges that several regulators are considering placing well-known cryptocurrencies — including ether, the world’s second-largest digital asset — in the securities category, which may cause their prices to fall drastically.

Richard Levin, a lawyer who’s worked with various blockchain and cryptocurrency ventures, described the meeting as “crucial” to the safety of digital assets and their respective users.

“It’s a ‘come to the lord’ moment,” he explained. “We are seeing a watershed moment in which many firms in the digital asset community who may have been ignorant of the law — or poorly informed — are now coming to terms with the fact that they are subject to regulators.”

While details surrounding the meeting remain largely confidential, the group says it’s trying to garner “utility token” classifications for many specific cryptocurrencies.

Many virtual entities have been introduced through initial coin offerings (ICOs). The process involves a team of entrepreneurs selling these virtual assets to raise funds for future projects. Generally, these currencies work as “internal payment methods” in the software the entrepreneurs create.

For a coin to classify as a security, users who buy it must have the opportunity to transform money into capital and garner profit by owning the asset without taking physical possession of it.

Securities are typically designed to be “shares” or stakes in a company, while utility tokens represent “access to [a] company’s product or service.” In bearing more practical uses, utility tokens are usually exempt from securities regulations.

Since 2017, over $6 billion in revenue have been generated through initial coin offerings, and most trade via unregulated exchange platforms. Many investors claim that these coins, in serving as payment methods, carry utilities, and should not be classified as securities or investment contracts.

But Jay Clayton — chairman of the SEC — disagrees, and believes every token offered through an ICO should be officially “registered as a security.” Very few are, and the SEC has sent dozens of subpoenas to both individuals and ventures involved in cryptocurrency, requesting data regarding how certain digital assets were marketed or issued.

Investments that fall into the securities category must have paperwork filed with registered exchanges. For the most part, entities like bitcoin, litecoin and monero can’t be placed here, as they were not originally distributed through ICOs. Furthermore, new coins are given daily to computers that work to extract them and maintain current networks.

While ether now follows a similar pattern, the coin is still in danger, primarily due to Ethereum’s past of garnering funds through ether token “presales” — events now classified as ICOs. The Venture Capital Working Group is arguing that ether “has become so decentralized,” it should not be labeled as a security, and that should it ever achieve “full decentralization,” it must be exempt from all future securities laws.

The group says it has the support of many “key players” in the digital currency and blockchain arena. Nevertheless, regulators have been slow to accept the proposal, and at press time, it is unclear what results will arise. Bitcoin Magazine will provide further updates on this story as they occur.