Regulation
SEC Chairman Says Bitcoin Is Not a Security
SEC Chairman Jay Clayton clarified that bitcoin is not a security. “Cryptocurrencies are replacing sovereign currencies…[they] “Replace the yen, the dollar, the euro with bitcoin. This type of currency is not a security,” he said in an interview with CNBCHis assessment is important because the debate around the regulation of cryptocurrencies often focuses on their status as securities. (See also: Is there any SEC guidance on ICOs?)
But Clayton declined to comment. the case of Ethereum and Ripplethe second and third most valuable cryptocurrencies, being classified as securities. At a conference in April, former CFTC Chairman Gary Gensler was very harsh on XRP and said there was a “strong case” for classifying it as a security. (See also: ICO Tokens Are Securities, Former CFTC Chairman Says).
Bitcoin, which has never sought public funds to develop its technology, does not failed THE Howey test used by the SEC to classify securities.
No respite for Ethereum tokens
Bitcoin may be out of the woods, but Ethereum tokens, which have been embroiled in a heated debate over their status, haven’t enjoyed a similar reprieve. Critics accuse the tokens of masquerading as utility tokens when they are actually securities.
In his CNBC interview, Clayton made it clear that his agency still intends to regulate tokens. “A token, a digital asset where I give you my money…[in exchange for] “Providing a yield… it’s a security and we regulate it. We regulate the offering and trading of that security,” he said. Clayton’s statement is a reiteration of the agency’s position repressive actions lately. (See also: SEC Warns Investors About Fraudulent ICOs).
Clayton is leading the fight against fraudulent cryptocurrencies. Given his stance during the interview, it seems like he’s not about to back down anytime soon. “We’re not going to do violence to the traditional definition of security that has worked for a long time,” he said. “We’ve been doing this for a long time, there’s no need to change the definition.” According to him, the U.S. stock market, which is “the envy of the world,” was built on the same rules. The reaction to his latest interview has not been positive.
Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or ICOs. As each individual’s situation is unique, a qualified professional should always be consulted before making any financial decision. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date of this writing, the author owns small amounts of Bitcoin and Litecoin.