Cryptocurrency traders have been notified that the US Securities and Exchange Commission considers a series of widely traded digital assets to be securities, a view that could also impose regulatory requirements that many enthusiasts feel could be devastating. Nevertheless, it might be difficult to determine what qualifies a coin as a security.
1. SEC's actions
The government planned to take a sharp stance in implementing its laws around such tokens.
According to the organization's chair, Gary Gensler and his immediate predecessor Jay Clayton under the Trump administration.
The extraordinary move by the markets regulator to identify nine cryptocurrency assets as securities as part of an insider trading case in late July caused concern among cryptocurrency dealers.
2. Cons of SEC's actions
In the US, rules governing commodity trading, and their derivatives are more focused on ensuring that companies, producers and farmers can effectively use derivatives to hedge against risks of price swings in commodities than on the role of small-time investors.
Crypto enthusiasts say that their ventures are decentralized in a way that makes old rules a poor fit, and crypto trading platforms argue that the assets they are listing should be considered commodities not securities.
3. What coins are or aren't considered a security
The short answer is that beyond the very biggest cryptocurrency there's a lot of ambiguity. US regulators including the SEC agree that Bitcoin, which is by far the largest digital asset, isn't a security. The second-biggest token, Ether, was deemed not fit to be a security during the Trump administration by a senior SEC official who signaled that while Ether may have started out qualifying as a security, it had grown into something sufficiently decentralized that it probably no longer was one. But after Ethereum changed to a system in which coins that are staked play a role in recording transactions, Gensler said that the fact that a staked coins can earn interest might lead to regulators to start treating it as a security.