SEC Chairman: “Bitcoin is not security”

SEC Chairman Jay Clayton commented on 26 April on the question of whether crypto assets should be classified as Securites. Bitcoin does not fall into this category as a pure crypto currency – tokens, on the other hand, like Ethereum and Ripple, do.

At the April 26 hearing of the Securities and Exchange Commissions (SEC) regarding the 2019 fiscal year, Chairman Jay Clayton commented on crypto currencies and ICOs. Initially, Clayton described the progress the SEC has made in recent months. The increased budget allows for an increase of 100 employees. This will allow the SEC to better engage with innovation and ensure the cyber security of US citizens.

Bitcoin is no security for crypto trader

“It’s a complicated subject. Because, as they have said, there are different types of crypto-assets. I divide them into two crypto trader categories. A pure medium of exchange – here often called Bitcoin – as a currency substitute is not considered by most as security.” Read more about it:

In fact, there are only a few pure crypto currencies in the top 20. Apart from Bitcoin (BTC), this probably only includes Bitcoin Cash (BCH), Litecoin (LTC) and Monero (XMR). Dash (DASH) with the masternode system is a unique case.

Tokens are classified as securities

Chairman Clayton then led the second category: Token. A token is a crypto asset used to fund projects.

“I have already said that there are very few tokens – so far I have not seen one – that are not security. If something can be classified as security, we should regulate it as security. Our securities regulation is based on disclosure and people should follow that and provide the information we need.”

Ethereum and Ripple also Securities?
According to Jay Clayton’s definition, Ethereum and Ripple would also be Securites. At Ripple, the company holds over half of all XRP. Ethereum, on the other hand, initially financed itself through a pre-sale in 2014. This circumstance is sufficient to classify ETH as a security in the eyes of the SEC. Although the Ethereum network has been “decentralized” since its launch, the pre-sale could lead to problems.

Furthermore, the Ethereum project plans to switch the consensus algorithm from Proof of Work to Proof of Stake. By then at the latest, the SEC’s securities classification should apply.

A group of Silicon Valley heavyweights apparently tried to turn the SEC’s opinion around without any result. After all, a laissez-faire approach to ICO projects symbolizes an attractive contact point for many start-ups. The SEC is thus following in the same footsteps as former CFTC chairman Gary Gensler. Last week, Gensler had also spoken of a classification of Ripple and Ethereum as securities.