Bitcoin is not a security, according to SEC Chair Jay Clayton. “Cryptocurrencies are substitutes for sovereign currency… They use bitcoin to replace the yen, dollar, and euro. “That form of cash is not a security,” he said to CNBC. His view is significant since the argument over cryptocurrency regulation is often centered on their status as securities. (See also: Do the SEC Have ICO Guidelines?)
Clayton, on the other hand, refrained from commenting on the case for ethereum and ripple, the second and third most valued cryptocurrencies, to be categorized as securities. Former CFTC head Gary Gensler slammed XRP at a conference in April, saying there was “a compelling argument” to categorize it as a security. (See also: Former CFTCC Chair: ICO Tokens Are Securities.)
Bitcoin, which has never sought public financing to build its technology, fails the SEC’s Howey Test for classifying securities.
No Reprieve For Ethereum Tokens
Bitcoin may be safe, but ethereum’s tokens, which have been mired in a contentious discussion over their legal validity, have not received a similar respite. Critics accuse these tokens of masquerading as utility tokens when, in reality, they are securities.
Clayton made it plain in his CNBC interview that his agency was still bent on regulating tokens. “A token, a digital asset in which I give you my money in exchange for a return…that is a security, and we regulate it.” “We govern the issuance and trading of that security,” he said. Clayton’s remark is a reiteration of the agency’s recent enforcement measures. (Also see: SEC Warns Investors About Scam ICOs.)
Clayton has been a driving force towards regulatory action against fake tokens. Based on his attitude throughout the interview, he does not seem to be willing to back down anytime soon. “We are not going to undermine the established understanding of security that has served us well for a long time,” he added. “This is something we’ve been doing for a long time; there’s no reason to modify the term.” According to him, the United States’ securities market, which is the “envy of the world,” was created on the same principles. His most recent interview received a negative response.
Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the writer to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author holds a minor quantity of bitcoin and litecoin as of the date this article was published.
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