While the SEC has been ambiguous and mysterious when calling a certain cryptocurrency a security or not, it has been clear that Bitcoin, the biggest cryptocurrency out there, is indeed not. The US securities authority ahs once again reiterated this point In a letter to Cipher Technologies Bitcoin Fund.
The SEC has made it clear that it has no qualms, or jurisdiction, over Bitcoin, and also been relatively clear about Ethereum escaping its grasp. However, as the SEC explained in its letter to Cipher, who attempted to register an “investment company” under the Investment Company Act of 1940, implying that Bitcoin is a security, Bitcoin being a security would be a really bad thing.
The SEC, in expressing its reasoning under the Howey test and its framework for analyzing digital assets, said that if Bitcoin was to be classed as a security, “it would then raise substantial other issues.”
More so, this would make the cryptocurrency “an unregistered, publicly-offered security, and, among other things, it potentially would render the proposed fund an underwriter of Bitcoin.”
The SEC went on to point out just why Bitcoin could not really be considered a security, expressing that its very nature precludes it from falling under this gambit.
“Among other things, we do not believe that current purchasers of Bitcoin are relying on the essential managerial and entrepreneurial efforts of others to produce a profit. Accordingly, because Cipher intends to invest substantially all of its assets in Bitcoin as currently structured, it does not meet the definition of an ‘investment company under the Investment Company Act and it has inappropriately filed on Form N-2,” the SEC expressed in their letter.
The job if determining the likelihood of a cryptocurrency being a security or not has become quite a controversial topic, especially of late. Currently, Ripple and its XRP token are in court trying to prove that there is no debate about its status. All the while, a new council has come out to rank certain coins, which has seen Ripple dubiously scrutinized as a potential security.
The SEC has become quite the important regulator in all things crypto. Its reach may only extend to the US, but it’s determination is taken seriously worldwide. Many feel that if the SEC can come fully on board with cryptocurrencies, then there will be a huge jump in adoption. This is especially pertinent towards a Bitcoin ETF, which continues to elude the community.