06 Jun SEC Chairman: Is bitcoin a “security?”
We forgive you if you’re confused about whether the US Securities and Exchange Commission (SEC) considers bitcoin or other altcoins a “security.”
Today in an interview on CNBC, SEC Chairman Jay Clayton said some cryptocurrencies like bitcoin are NOT securities.
He appeared in a wide-ranging interview speaking about the future of blockchain, cryptocurrencies and initial coin offerings (ICOs).
Clayton on distributed ledger technology (DLT)
The interview with CNBC host Bob Pisani, opened with Clayton’s view on DLT.
“Distributed ledger technology? Incredible promise. It can drive efficiencies not only in the financial markets but in a lot of markets,” Clayton said. “Two areas in the financial markets where distributed ledger technology has come to the fore. Cryptocurrencies. These are replacements for sovereign currencies, to replace the dollar, the yen, the euro with bitcoin. That type of currency is not a security.”
When is a coin a security?
Clayton then turned to what the SEC does consider a security. “A token, a digital asset where I give you my money and you go off and make a venture, you have some company you want to start or something. In return for me giving you my money, you say, you know what, I’m going to give you a return. Or you can get a return in the secondary market by selling your tokens to somebody? That is a security and we regulate that. We regulate the offering of that security and we regulate the trading of that security. That’s our job and we’ve been doing it for a long time”
Pisani asked if Clayton was planning to make a clear statement because of confusion over the definition of some cryptocurrencies as a security.
The SEC chairman replied, “if it’s a security, we’re regulating it.”
Clayton continued, “if you have an ICO or a stock and you want to sell it in a private placement, follow the private placement rules. There’s no secondary trading, you have to do that. If you want to do an IPO with a token, come see us. File financial statements. File disclosure. Take the responsibility our laws require and we’re happy to help you do that public offering.”
Pisani asked, “you seem to be saying you’re not going to change the definition of a security just to suit the ICO community. Is that right?”
Clayton replied, “I’m not going to support that.”
What about altcoins?
The SEC chair was asked about his view of altcoins such as Ether and Ripple. “Is Ether a security,” Pisani asked.
“I’m not going to comment on specific crypto assets and whether are a security or are not a security,” Clayton said. “But you captured the definition very well. Am I giving you my money to go off in a venture and I’m relying on you and the efforts of you and your colleagues?”
Pisani persisted, “you do understand there are lawsuits right now, for example like Ripple and whether it is or is not a security. That’s partly one of the issues here. Obviously, how the SEC feels, it’s very important. ”
Clayton replied, “we’re not going to do any violence to the traditional definition of a security which has worked well for a long time and I believe it will continue to work well.”
“Is it possible the SEC might say these were securities at one time and no longer are because they’re not centrally controlled for example?” Pisani asked.
Clayton replied, “Look, that’s a question that’s out there. We’ll be replying to that in answering specific facts and circumstances, but we’ve been doing this a long time and has no need to change our fundamental approach.”
Bitcoin and ETFs
Pisani said a lot of people are chomping at the bit to get ETFs approved. “What criteria do you need to get ETF’s approved?” he asked.
“Our division of investment managers has put out and been very clear to the industry in the types of things that we’re going to need in any asset class if we’re going to approve a product,” Clayton replied. “One of those things is, is the pricing something that people can rely on? So, asset verification. Our communication to the market on this has been very clear.”
Clayton said he’s pleased with his colleagues at the SEC because they’ve been very clear and open about what’s needed for to satisfy SEC rules.
If you’re trading cryptocurrency or planning an ICO, it’s an interview worth viewing and you can see it here.