“Cryptocurrencies can replace sovereign currencies” says Jay Clayton

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Bitcoin’s price might have taken a hammering in recent weeks, but there is at least a fair amount of positive news doing the rounds. On top of several ringing endorsements from the likes of Jack Dorsey, Tom Lee, and Steve Wozniak, the SEC has recently spoken positively about Bitcoin’s potential. While it might have been at odds with the world’s leading cryptocurrency in the past, the words of Jay Clayton – current SEC Chairman – show that the tide is turning.

Bitcoin is the Future

During a recent interview, Clayton took the time to address the growing debate surrounding what cryptocurrencies – if any – should fall under SEC jurisdiction. Clayton said, “Cryptocurrencies, [they’re] replacements for sovereign currencies, replace the dollar, the euro, the yen with bitcoin. That type of currency is not a security.” Effectively, he’s put Bitcoin on the same level as current sovereign currencies, but he made it crystal clear that the rules will not be bent when it comes to the definition of a security in the eyes the SEC.
According to Clayton’s definition, an ICO – in the sense of a digital asset, coin, or token used in fundraising processes – is a security. He reaffirmed that these rules are what they are and won’t be adjusted nor addressed on a case by case basis – “We’ve been doing this a long time, there’s no need to change the definition.” Clayton said, “A token, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you my money I say ‘you can get a return’ that is a security and we regulate that.” It’s pretty evident that the ridged view that the SEC carries towards cryptocurrencies isn’t likely to change anytime soon.

From Billions to Trillions

Clayton also appeared to be somewhat braggadocious during the interview, as he declared the US securities market – which is valued at $19 trillion – is “the envy of the world.” His words are at least backed up by statistics, as ICOs have generated a staggering $9.1 billion in funding during 2018 thus far according to Autonomous Next. With the ICO market hotter than ever, it’s clear that it’s contributing – at least in part – to the expanding US securities market. “If you have an ICO or a stock, and you want to sell it in a private placement, follow the private placement rules. If you want to do any IPO with a token, come see us,” Clayton said, which shows that SEC’s arms are open to the growing cryptocurrency market.

Happy to Help

What’s going to please those in the crypto space further is that the SEC has declared itself “happy to help you do that public offering,” as long as the issuing company adheres to SEC laws and requirements. Anyone that has an interest in ICO investment should make themselves aware of the Howey Test though, as it is the basis of how a security is classified. Built upon a 1946 US Supreme Court Ruling – yes, it really does date back that far – it classifies any investment of capital into a common enterprise where an investor should profit from the effort of another as a security.

Shuffling the Deck

Clayton – along with the rest of SEC – stands by the position that all ICOs are securities, but does admit that the companies behind them should be classified differently. It does make the space somewhat complicated at times, which probably explains the SEC’s latest hierarchy shake-up. Valerie Szczepanik is now the SEC’s Senior Advisor for Digital Assets and Innovation and Associate Director of Corporation Finance, along with being named leader of its dedicated cryptocurrency division.

The Amazing SEC U-Turn

For what feels like an eternity, the SEC functioned as something of a cryptocurrency denier. How times have changed, with it now welcoming properly constructed ICOs, while its recent comments on Bitcoin’s potential to overtake sovereign currencies have not gone unnoticed.