The chairman of the Securities and Exchange Commission of the US Jay Clayton in an interview with CNBC clearly stated that Bitcoin is not a security. He also said that most ICO’s are will be considered as securities according to the original definition of a security which will not be changed.
There has been a lot of confusion in the wild west Cryptosphere on whether the tokens issued by hundreds of ICO’s are considered securities or not. Most of the ICO’s claim that their token is purely a utility token. But according to the chairman of SEC Jay Clayton had previously said that he sees most tokens as securities.
On a CNBC interview today, Jay said that the “distributed ledger” technology has a lot of scope and seems promising especially in the Financial markets, he goes on to say that Cryptocurrencies like Bitcoin which are competing with sovereign currencies like the Dollar, Yen, etc are NOT securities.
replace the Dollar, the Yen, the Euro with Bitcoin, that type of Currency is not a Security
He goes on to define what a security is:
A token, a digital asset where I give you my money and you go off and make a venture or a company…In return for me for giving you my money you say…I’m going to give a return or you can get a return in a secondary market by selling your token to somebody, that is a security and we regulate that. We regulate the offering of that security and we regulate the trading of that security.
When asked whether he will make a clear statement about this he said to the interviewer “Bob, I hope I just did”.
He was adamant about changing the rules of the definition of a security, he says that it has been working well for so long and that he doesn’t see a reason to change it.
The SEC follows the Howey test (which was introduced in 1946) to determine whether an asset is a security or not. It has 4 criteria
- Investment of money
- in a “common enterprise”
- with an “expectation of profits”
- solely on the “efforts of others”
There have been a lot of discussions of whether Cryptocurrencies like Ethereum and Ripple would be considered as securities or not when asked he denied to comment on any particular Cryptocurrency other than Bitcoin.
The co-founder of Ethereum Joseph Lubin had clearly stated that Ethereum should not be considered as a security As Ethereum is a protocol and does not belong to a single company or organization. Although if the ICO’s which are issued on top of Ethereum are considered as securities then it is not clear whether Ethereum will also a security, and if it is in the US then it will be only applicable to the US investors and the tokens outside the US will not be regulated by the SEC.
The SEC recently also appointed Valerie Szczepanik to serve as a senior advisor for digital assets and innovation.
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