Cointime

Download App
iOS & Android

Why Is The SEC So Determined To End Crypto?

TL;DR:

  • The SEC’s role is to protect investors and enforce federal securities laws in regards to cryptocurrencies.
  • The SEC uses the Howey Test to determine if a cryptocurrency is a security.
  • To reduce the likelihood of being deemed a security by the SEC, a cryptocurrency can be structured as a utility token and designed to be decentralized.
  • Despite challenges posed by the SEC, there is still potential for the crypto industry to thrive in the United States with careful planning and a focus on avoiding characteristics that the SEC considers indicative of a security.

The SEC is serious about crypto regulation

As cryptocurrencies continue to gain popularity and widespread adoption, they have come under increased scrutiny from regulators, particularly the U.S. Securities and Exchange Commission (SEC). The SEC’s role is to protect investors and maintain the integrity of the securities market by enforcing federal securities laws. In recent years, the SEC has become increasingly concerned about the potential for cryptocurrencies to be used for fraudulent or manipulative activities, leading to a crackdown on the crypto industry.

How would you know a security from a non-security

In determining whether a cryptocurrency is a security, the SEC uses the Howey Test, which defines a security as an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. The SEC has applied this test to various cryptocurrencies and has determined that many of them are indeed securities and therefore subject to federal securities laws. This has caused concern among many in the crypto industry, as the designation of a cryptocurrency as a security can have significant consequences, including the requirement to register with the SEC and to comply with a host of other regulatory requirements.

How to avoid being classified as a security

So what can be done to avoid being deemed a security by the SEC? There is no one-size-fits-all answer, as each cryptocurrency is unique and the SEC’s determination will depend on a number of factors. However, there are some steps that can be taken to reduce the likelihood of being deemed a security. For example, a cryptocurrency can be structured as a utility token rather than a security token, with a specific use case that does not depend on the profits or success of the underlying enterprise. Additionally, it can be designed to be decentralized, with no central authority controlling the supply or distribution of the token.

Still a lot of potential

Despite the challenges posed by the SEC’s stance on cryptocurrencies, there is still a lot of potential for the crypto industry to thrive in the United States. Cryptocurrencies offer many benefits to investors, such as lower fees, greater accessibility, and increased transparency. Furthermore, the industry is still in its early stages and there is a lot of room for growth and innovation.

The SEC’s determination that many cryptocurrencies are securities has created significant challenges for the crypto industry. However, with careful planning and a focus on avoiding the characteristics that the SEC considers to be indicative of a security, it is possible for cryptocurrencies to continue to grow and evolve in the United States, providing valuable benefits to investors and employees alike.

SEC
Comments

All Comments

Recommended for you

  • Web3 AI platform ChainML completes $6.2 million seed round of financing

    Web3 AI platform ChainML has announced the completion of a $6.2 million seed round of expansion financing, led by Hack VC, with participation from Inception Capital, HTX Ventures, Figment Capital, Hypersphere Ventures, and Alumni Ventures. The platform also announced the launch of its agent-based foundation layer, Theoriq.

  • Metaverse project Baby Shark Universe completes seed round financing

    Baby Shark Universe project, a metaverse project, has completed a seed round of financing with a valuation of $34 million. Participating investors include Animoca Brands, CREDIT SCEND, Sui Foundation, Comma3 Ventures, Creditcoin, GM Ventures, Neuler, Notch Ventures, X+, and Planetarium. The specific amount has not been disclosed, and the new funds will be used for development and global marketing. According to reports, Baby Shark Universe is an open-world role-playing game where players can create their own game content (items, maps), enjoy content created by other players, and expand the game's narrative based on their choices and actions.

  • Hong Kong Stock Exchange Confirms Crypto ETFs Unavailable to Mainland Chinese Investors

    According to Coindesk, the Hong Kong Stock Exchange has confirmed that cryptocurrency ETFs are not available to mainland Chinese investors. Hong Kong's cryptocurrency ETFs will provide a means to bypass capital controls in mainland China due to their unique physical redemption model.

  • Web3 social infrastructure UXLINK completes $5 million in financing

    Web3 social infrastructure UXLINK announced the completion of a new round of $5 million financing, led by SevenX Ventures, INCE Capital, and HashKey Capital. It is reported that UXLINK's total financing has now exceeded $15 million.

  • Chinese police bust underground bank using cryptocurrency for illegal currency conversion

    Chinese police have arrested six people for running an illegal currency conversion operation that used cryptocurrency to handle around $296 million. The operation was discovered by the Public Security Bureau of Panshi City, Jilin, and involved an "underground bank" that exploited the anonymity and ease of cross-border transfers offered by crypto. The operation used domestic accounts to receive and transfer funds, and exchanged between the yuan and South Korean won. The service was used by Korean purchasing agents, e-commerce firms, and import/export companies, among others.

  • Hong Kong Securities Regulatory Commission warns the public to beware of a suspicious asset investment product called "LENA Network"

    Hong Kong Securities and Futures Commission warned the public to be wary of a suspicious virtual asset investment product called "LENA Network". The product involves pledging and lending arrangements related to virtual assets, and claims to provide high returns to investors. This investment product has not been approved by the Securities and Futures Commission for sale to the Hong Kong public. The Securities and Futures Commission notes that the Hong Kong public can access information about the product and contact the product through the Internet. The Securities and Futures Commission advises against trusting those "too good to be true" investment opportunities and remaining vigilant when making investment decisions.

  • Hong Kong Securities and Futures Commission: The Anti-Money Laundering Ordinance applies to the virtual asset industry

    The "virtual currency to ETF" mechanism in Hong Kong has raised concerns about money laundering. The industry believes that the review difficulty, such as KYT (Know Your Token), is high. Some individuals with mainland backgrounds are trying to conduct small-scale "virtual currency to ETF" transactions, taking the opportunity to "whiten" their own holdings of ether and bitcoin through forms such as personal accounts. They have also deployed some virtual currencies to Hong Kong's virtual currency exchanges and will decide whether to increase capital in the future depending on the situation. When responding to relevant questions, the Hong Kong Securities and Futures Commission emphasized that in the operation of ETF products, every link in the entire virtual asset ecosystem, including fund companies, custodians, asset trading platforms, participating brokers, etc., must be licensed or recognized institutions and strictly comply with requirements such as asset custody, liquidity, valuation, information disclosure, and investor education. The "Anti-Money Laundering Ordinance" of the Securities and Futures Commission also stipulates that financial institutions and designated non-financial enterprises and industry personnel must comply with customer due diligence and record-keeping requirements, and relevant regulations apply to the virtual asset industry.

  • TON community member: Some TON wallets received virtual account NFTs starting with "888", which is a phishing project

    On May 13th, according to a member of the TON official community, a new NFT with a virtual number starting with "888" has been added to the TON wallet. However, the transaction fee for each transfer is as high as 1 TON, which is caused by the fishing project changing the Gas.

  • US Court to hear proposed remedies from Terraform Labs, Do Kwon in May

    The SEC proposed that Do Kwon and Terraform pay roughly $5.3 billion in disgorgement, prejudgment interest and civil penalties, while the firm’s team suggested only $1 million.

  • SEC breaks from past policy guidelines in Uniswap crackdown

    The U.S. SEC Wells notice against Uniswap raises questions about consistency in policy enforcement.