BITCOIN has enjoyed a ringing endorsement from the SEC after the head of the Securities and Exchange Commission Chairman announced that cryptocurrencies are not a security and that Bitcoin could replace sovereign currencies such as the dollar, Euro or yen.
The chairman was addressing a growing debate over which cryptocurrencies should fall under SEC jurisdiction.
“Cryptocurrencies: These are replacements for sovereign currencies, replace the dollar, the euro, the yen with bitcoin,” SEC Chairman Jay Clayton told CNBC on Wednesday. “That type of currency is not a security.”
But he also insisted that the agency will not bend the rules when it comes to defining what is or what isn’t a security.
A token, or a digital assets used in a fundraising process known as an initial coin offering, or ICO, are securities by Clayton’s definition.
He said there will be no adjustment of the rules for initial coin offerings and Clayton underlined that tokens or digital assets used in that fundraising process are securities.
“A token, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you my money I say ‘you can get a return’ that is a security and we regulate that,”SEC Chairman Jay Clayton told CNBC Wednesday in a report by Kate Rooney. “We regulate the offering of that security and regulate the trading of that security.”
He explained: “We are not going to do any violence to the traditional definition of security that has worked for a long time.
“We’ve been doing this a long time, there’s no need to change the definition.”
The U.S. has built a $19 trillion securities market, Clayton said, that’s “the envy of the world”.
ICOs have raised $9.1 billion this year alone, according to research by Autonomous Next.
“If you have an ICO or a stock, and you want to sell it in a private placement, follow the private placement rules,” Clayton said “If you want to do any IPO with a token, come see us.”
The SEC is “happy to help you do that public offering” if issuers take the responsibility SEC laws require, he said.
Whether an asset is a security right now follows the “Howey Test.”
The ruling comes from a 1946 U.S. Supreme Court case that classifies a security as an investment of money in a common enterprise, in which the investor expects profits primarily from others’ efforts.
Clayton reiterated his position in March when he said that all ICOs constituted securities, saying “if it’s a security, we’re regulating it.”
But companies tied to those cryptocurrencies say it should fall under a different category, in many cases because of their utility.
On Tuesday, the SEC appointed a leader to its emerging cryptocurrency division.
Valerie Szczepanik has been promoted to Associate Director of the Division of Corporation Finance and Senior Advisor for Digital Assets and Innovation.
Bitcoin was valued at $7,699.57 as this report was published on Friday, up 0.99% on the day’s trading.
Bitcoin is worth more than $130 billion, according to CoinMarketCap.