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SEC Chairman Says Bitcoin Is Not a Security
SEC Chairman Jay Clayton clarified that bitcoin is not a security. “Cryptocurrencies are substitutes for sovereign currencies…[they] replace the yen, the dollar, the euro with bitcoin. That kind of currency is not a security,” he said in an interview with CNBCHis assessment is important because the debate over cryptocurrency regulation often centers on their status as securities. (See also: Are there any SEC guidelines on ICOs?)
But Clayton refrained from commenting. the case of ethereum and ripplethe second and third most valuable cryptocurrencies, classified as securities. At an April conference, former CFTC chairman Gary Gensler came down hard on XRP and said there were “strong reasons” to classify it as a security. (See also: ICO tokens are securities: former CFTC chairman).
Bitcoin, which has never sought public funding to develop its technology, does not do not pass THE Howey’s test used by the SEC to classify securities.
No Respite for Ethereum Tokens
Bitcoin may be safe, but Ethereum tokens, which have been embroiled in a heated debate over their status, have not been afforded such respite. Critics accuse these tokens of masquerading as utility tokens when, in reality, they are securities.
In his interview with CNBC, Clayton made it clear that his agency was still intent on regulating tokens. “A token, a digital asset where I give you my money…[in exchange for] providing a return… this is a security and we regulate it. We regulate the supply and trading of that security,” he said. Clayton’s statement is a reiteration of the agency repressive actions in recent times. (See also: SEC Warns Investors About Scam ICOs).
Clayton has been at the forefront of regulatory action against fraudulent tokens. Based on his stance in the interview, it would appear that he is not ready to back down any time soon. “We are not going to do violence to the traditional definition of security that has worked for a long time,” he said. “We’ve been doing it for a long time, there’s no need to change the definition.” He said the U.S. stock market, which is “the envy of the world,” was built according to 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 is not a recommendation by Investopedia or the author to invest in cryptocurrencies or ICOs. Since each individual’s situation is unique, you should always consult with a qualified professional before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. The author holds small amounts of bitcoin and litecoin as of the date of this writing.