The US Securities and Exchange Commission (SEC) recently classified 67 cryptocurrencies as "securities", affecting more than $100 billion in tokens on the market 1 . This step was taken after long processes, in which the SEC defined the cryptocurrencies it considers "securities" 1 .
But why does the SEC do this? According to the chairman of the SEC, Gary Gensler, "everything but Bitcoin" is considered a "security" that falls under the purview of the agency 1 . By classifying certain cryptocurrencies as “securities,” the SEC can regulate these assets similarly to traditional stocks or bonds.
A recent example is the case against Binance and Coinbase, where the SEC introduced 10 new cryptocurrencies under the “securities” classification, including BNB, Solana, Cardano, Polygon and Axie Infinity 1 . Other notable cryptocurrencies that the SEC has deemed "securities" include Ripple's XRP, LBRY Credits, and Algorand 1 .
These SEC decisions impact over $100 billion in the crypto market, or about 10% of the total crypto market capitalization of $1.09 trillion 1 .
In conclusion, the classification of cryptocurrencies as "securities" by the SEC is an important step for the regulation of the crypto market. This not only increases transparency and accountability, but also helps protect investors by ensuring that securities laws are followed.
The term "securities" is a broad term that covers a range of financial instruments. In the context of financial markets, a "security" is a certificate or other financial instrument that has intrinsic value and can be traded. These include stocks, bonds, options, notes, certificates of deposit, and in some cases even certain types of cryptocurrencies.
The main characteristic of a security is that it represents an investment. Investors buy securities with the expectation that they will make a profit in the future, either by receiving dividends or interest, or by selling at a higher price.
In the United States, the Securities and Exchange Commission (SEC) regulates securities transactions and mandates transparency in financial disclosures to protect investors.
An asset that is not considered a security, on the other hand, can be anything else of value that can be owned or traded, but does not meet the criteria of being a security. For example, commodities (such as gold or oil), real estate, and most cryptocurrencies (such as Bitcoin) are not considered securities. These assets are usually less regulated and may involve greater risk for investors.
In the case of cryptocurrencies, the difference between a security and a non-security can be complex. For example, the SEC considers most initial coin offerings (ICOs) to be securities offerings and must comply with relevant regulations. This is because, in many cases, investors buy tokens in an ICO with the expectation that these tokens will increase in value, making them similar to securities.
On the other hand, Bitcoin, the most well-known cryptocurrency, is not considered a security by the SEC. This is because the Bitcoin network is decentralized and there is no central entity that is responsible for increasing the value of Bitcoin. Also, people who own Bitcoin do not receive the dividends or other forms of profit similar to those associated with owning securities.
It is important to note that although classifying an asset as a "security" involves a higher level of regulation, this is not necessarily a bad thing for investors. The regulations are intended to protect investors by ensuring they have access to the information they need to make informed decisions and are protected against fraud and market manipulation.
