Bitcoin continues to soar towards new highs while the cryptocurrency industry remains highly unregulated. Regulators in the United States have also been quiet in this regard up until recently, as former SEC chairman Jay Clayton has warned that crypto regulations will come both directly and indirectly.
Speaking on CNBC’s Squawk Box, Clayton has recently said that Bitcoin hasn’t been classified as a Security for quite some time. However, its non-security status doesn’t protect the flagship cryptocurrency from upcoming regulations, which he warns could come sooner than expected.
When the show’s host Andrew Ross Sorkin highlighted that the regulator did not cement a position on Bitcoin regulation under Clayton’s watch, he responded by stating that bitcoin was declared not to be security before he even took up his position as the head of the regulatory body.
“Bitcoin was decided to be not a security before the time I got to the SEC. Therefore, the SEC’s jurisdiction over Bitcoin was rather indirect.”
Despite leaving his position as the SEC chairman in December 2020, Clayton remains involved with the crypto industry as the advisor for renowned cryptocurrency investment firm One River Asset Management.
Clayton did not clarify as to how the upcoming regulations would affect the market, or what new laws are coming from his time heading the SEC. He expects the regulatory environment is due for a shake-up. He continued:
“Where digital assets land at the end of the day […] will be driven in part by regulation—both domestic and international—and I expect, and I’m speaking as a citizen now, that regulation will come in this area both directly and indirectly whether it’s through how these are held at banks, security accounts, taxation and the like. We will see this regulatory environment evolve.”
The Security Question
Clayton’s comments come at a time when the SEC is amidst a legal battle with blockchain payments company Ripple, regarding the legal status of the XRP token. The blockchain company has also demanded the regulator present documents regarding their decision to not consider Bitcoin and Ethereum security.
While Ripple argues that XRP cannot be classified as security because of its decentralized nature, the SEC, however, seems to be visualizing XRP tokens as shares for the company and hence its sales as an illegal securities offering.