The fear in the markets has largely been around whether or not Cryptocurrencies will be deemed as financial securities by the board of the Securities and Exchanges Commission in the United States. This ruling could have changed the legislation for how Cryptocurrencies and the acquisition of them by everyday investors are handled forever. Therefore the suspense has been brewing, however, today the news has been broken and gratefully, it was happy news, well depending on how you look at it.
The Ruling Announced
The SEC Chairman Jay Clayton has announced that the SEC will not be putting aside legislation for Cryptocurrencies and that they will be enforcing the laws as and when they apply. In addition, that while all Cryptocurrencies, such as Bitcoin, will continue to trade as per usual under the classification of commodities, ICO’s will not. ICO’s or Initial Coin Offerings have been classified as securities after undergoing analysis by the SEC.
What Are ICO’s?
ICO’s are digital tokens whereby one investor gives funding to a person or group who takes that money, and then uses it to generate profit through placing the money in strategic investments. Does this sound familiar? Well, it should, the reason is that the definition of an ICO is the same underlying premise for financial securities. Therefore, as Jay Clayton explained while in an interview with CNBC, the SEC will simply proceed to place rules and regulations around ICO’s in a similar fashion as to how they would around any other type of security.
When Did This Start?
The debate first emerged in early April this year, when a consort of lawyers, exchange representatives, and Cryptocurrency promoters gathered to form what is now known as the Venture Capital Working Group. This group sat down with the SEC and attempted to persuade the SEC to classify all Cryptocurrencies as ‘utility tokens’ rather than having them be classified as securities.
The reason that the Venture Capital Working Group wanted the label of utility token is that this would lead to benefits such as giving all consumers easy access to Cryptocurrencies without any red tape. However, securities are not as happy-go-lucky product offerings, due to the fact that they are classed as a share or part of a company. Individuals who purchase securities can earn profits and thus, undergo rigorous checks and analysis in order to ensure the safety of the company.
What About Ether?
A huge conundrum was if ether, which is now number two in the leaderboard of Cryptocurrencies globally, would be a financial security. This was down to the fact that ether was first an ICO and later transitioned to a Cryptocurrency. However, while ether is not a security, Jay Clayton did want to send a message to the world, stating that the SEC is here to help ICO’s and not hinder their growth.
The CEO of deVere Investment Group was positive about the ruling from the SEC, stating that the decision showed that Cryptocurrencies and their associated technologies were now becoming more integrated into society. In addition, he added that he agreed with the SEC’s ruling on ICO’s and that the sorting of the products would now allow for the removal of distrust against Cryptocurrencies that had been prevalent for so long.