Crypto, Blockchain Should Adapt to US Securities Laws, not Contrariwise, SEC Chairman Says
The United States should not adjust its securities laws to meet the characteristics of new technologies such as blockchain, because the rules have been working very well for several decades, the head of Securities and Exchange Commission (SEC) Jay Clayton has said.
Speaking to a New York Times organized TimesTalksDealBook last week, the SEC head reaffirmed his previous position that cryptocurrencies, initial coin offerings (ICOs), and blockchain should adapt to the existing regulations. According to Clayton, US securities laws are working properly because they can protect investor rights regardless of the used technology as the provisions are technology neutral.
“Technology ought to be able to fit into our rules. And I think this [blockchain] technology has incredible promise for adding efficiency to our marketplace, but I’m not going to change the investor-protection aspects of those offering rules or those trading rules just because there’s a new technology,” Clayton explained.
Commenting on the largest cryptocurrency, SEC Chairman noted that Bitcoin (BTC) is a different asset than most of the coins issued during ICOs. BTC is similar to existing fiat currencies, but it is not managed in a centralized way.
“It’s widely distributed. It was not controlled by a single entity or other people. It’s used as a medium of exchange. You’re not looking to the efforts of others to increase your return. So it looks much more like a currency than security.”
During a Senate hearing in February, Clayton explained that every ICO that he had seen was a security in terms of the federal laws. However, last week, a US court denied an SEC injunction against Blockvest ICO, saying that the regulator was unable to “demonstrated that the BLV tokens purchased by [...] test investors were ‘securities’ as defined under the securities laws.”
Currently, SEC follows the so-called Howey test when defining whether particular assets are securities. The test is a result of a US Supreme Court decision from 1946 which ruled that investment contracts are securities if “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”