Ex-SEC Chief's Warning to Crypto Investors
Ex-SEC Chair Clayton affirms numerous cryptocurrencies could qualify as securities in the U.S.
Former SEC Chairman Jay Clayton has reiterated his perspective on the cryptocurrency market, aligning with his successor Gary Gensler's view. Clayton emphasized that many digital tokens could be classified as securities in the U.S., as stated at the R3 CordaDay conference, reports TechCrunch.
The broad definition of "security" is intentionally flexible, Clayton clarified. Regulators typically employ the "Howey Test" to determine if an asset is an investment contract, hence a security. The test requires that the asset raises capital from investors, who anticipate profits due to others' endeavors.
Despite a dearth of official guidelines from the SEC, its recent lawsuits against Binance and Coinbase suggested that several large-cap cryptocurrencies, such as Solana, Cardano, Polygon, BNB, and Binance USD, may be securities.
However, Clayton asserted that securities could shed their label over time if they develop appropriate utilities. He illustrated this with Broadway show tickets, which could be regarded as securities if they are initially purchased with the intent of reselling at a profit.
Clayton also highlighted the contentious legal battles and confusion due to misleading advice regarding asset classification.
The SEC is still at odds with the Commodities and Futures Trading Commission (CFTC) over crypto categorizations, with the latter considering many cryptocurrencies as commodities. This disagreement extends to stablecoins like Tether and Binance USD.
Meanwhile, other countries like Canada provide swift and clear guidelines on crypto compliance, including recognizing fiat-backed stablecoins as securities. Coinbase CEO Brian Armstrong pointed out the U.K.'s more straightforward regulatory environment, with one financial regulator and less focus on classifying cryptocurrencies.
