A major concern for investors is crypto regulatory uncertainty. The US Securities and Exchange Commission has continued to insist that all cryptocurrencies other than bitcoin should be regulated by the SEC. A former SEC executive suggested in a 2018 speech that cryptos can be labeled as non-securities as they achieve sufficient decentralization. Find out if your crypto is a security or a commodity. Crypto regulatory uncertainty is a major concern for investors. The US Securities and Exchange Commission has continued to insist that all cryptocurrencies, except bitcoin, should be regulated by them. A former SEC executive suggested in a 2018 speech that cryptos can be labelled as non-securities as they achieve sufficient decentralization. Find out if your crypto is a security or a commodity. A New York district court called bitcoin (BTC) and Ethereum (ETH) "crypto commodities" in late August 2023. By 2023, the debate over whether cryptocurrencies are securities or commodities m
A major concern for investors is crypto regulatory uncertainty. The US Securities and Exchange Commission has continued to insist that all cryptocurrencies other than bitcoin should be regulated by the SEC. A former SEC executive suggested in a 2018 speech that cryptos can be labeled as non-securities as they achieve sufficient decentralization. Find out if your crypto is a security or a commodity.
Crypto regulatory uncertainty is a major concern for investors. The US Securities and Exchange Commission has continued to insist that all cryptocurrencies, except bitcoin, should be regulated by them. A former SEC executive suggested in a 2018 speech that cryptos can be labelled as non-securities as they achieve sufficient decentralization. Find out if your crypto is a security or a commodity.
A New York district court called bitcoin (BTC) and Ethereum (ETH) "crypto commodities" in late August 2023.
By 2023, the debate over whether cryptocurrencies are securities or commodities may reach its boiling point.
We have analyzed commentary from the US Securities and Exchange Commission (SEC) to help you stay up-to-date on crypto regulatory developments.
Is cryptocurrency a security or a commodity?
First of all, what is the difference between a security and a commodity?
Investors invest in financial products in the expectation of profiting from others' efforts (usually the promoter).
Stocks and bonds are typical securities. Securities are heavily regulated. Promoters must disclose all risks and additional information.
Commodities serve as a medium of exchange as well as a store of value. Commodities are essential to the production of other goods and services.
Natural raw materials and agricultural products are commodities. They are less regulated than securities.
Is there a difference between a security and a commodity?
In December 2020, the US Securities and Exchange Commission filed a lawsuit against Ripple and its executives for raising more than $1.3 billion illegally by selling XRP tokens. In accordance with federal securities law, XRP tokens are considered securities since they are considered investment contracts.
There has been much controversy surrounding Hinman's speech. The US SEC has repeatedly stated that it represents Hinman's personal views and not those of market regulators. According to internal SEC emails released to the public in June 2023, several SEC members vetted the speech.
Cryptocurrency Is Considered a Security by the SEC?
The US Securities and Exchange Commission considers ETH and most cryptocurrencies securities for the following reasons:
Initial coin offerings
Almost all cryptocurrency projects, including Ethereum, raise capital via initial coin offerings (ICOs), in which investors exchange fiat currency for crypto tokens, similar to IPOs.
Investors relied on third parties for future price appreciation (profits) of their tokens, as the funds raised through ICOs were pocketed by development teams.
Bitcoin is one of the few cryptocurrencies that did not undergo an ICO.
Instead of selling to users, sell to investors
Cryptocurrencies are marketed as digital currencies that can be used as a medium of exchange on the internet. However, most people buy cryptocurrencies expecting their tokens to increase in value over time. Just because a cryptocurrency is called a utility token does not mean it ceases to be a security.
Development teams
Promoters with substantial hoards of tokens may manage a cryptocurrency project, even if it isn't managed by a corporate entity. Promoters may want to increase the value of their cryptocurrency holdings, making the project dependent on them.
Are cryptocurrencies and SEC regulations compatible?
Considering the billions of dollars lost to scams, rug pulls, and crypto bankruptcies, regulating cryptocurrencies isn't all that bad.
Does the blockchain rely on a centralized entity for its management, upgrades, and operations?
How many tokens does the development team hold?
What is the purpose of cryptocurrencies? Who is issuing them? Where are the proceeds going?
Will the development team raise funds after the ICO?
Is the ICO aimed at the general public or at potential blockchain users?
What is cryptocurrency's utility?
Two of the world's biggest crypto exchanges - Binance and Coinbase - were sued by the US Securities and Exchange Commission in 2023 for selling unregistered securities.
According to SEC chairman Gary Gensler, the Commodity Futures Trading Commission (CFTC) has openly stated that bitcoin is a commodity on its website.
The status of ETH and other cryptocurrencies remains unclear.
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