Bitcoin has long been touted as one of the very few cryptocurrencies that is safe from being classified as a security, and the Securities and Exchange Commission (SEC) has all but put the seal on this judgement in a letter to an investment firm sent earlier this month. The letter, written to tech hedge fund Cipher Technologies, relays the SEC’s position on Bitcoin, summarizing what many in the crypto space already knew, that the world’s original cryptocurrency cannot be considered a security in accordance with existing laws.
Bitcoin as a Security is “Incorrect”
Cipher had initially tended, whether genuinely or in order to provoke an official response on the matter, that Bitcoin was a security, prompting Brent Fields, Associate Director of the Disclosure Review and Accounting Office, to offer the SEC’s official position on Bitcoin:
… we disagree with your conclusion that bitcoin is a security. We think that conclusion is incorrect under both the reasoning of SEC v. Howey and the framework that the staff applies in analyzing digital assets. Among other things, we do not believe that current purchasers of bitcoin are relying on the essential managerial and entrepreneurial efforts of others to produce a profit.
The letter goes further, stating that if Bitcoin were to be considered a security then it would raise “substantial other issues”, such as classing it as an “unregistered, publicly-offered security”, which would lead Cipher act as an underwriter for it.
One Down, Thousands to Go
While confirmation of this matter is of course welcome, it was never really in doubt that Bitcoin wouldn’t be classed as a security given its origins and the fact there was never a token raise of any kind for it. What is of much more interest to the community is the SEC’s view on the chasing pack, such as Ethereum and, in particular, XRP. In 2018 the SEC seemed to announce that Ethereum wasn’t a security, but this sentiment has since become muddied given the SEC’s increasingly critical stance on ICOs, of which Ethereum was the first, albeit not with that specific name at the time. XRP is the real test case, but with a case on this very subject moving slowly through the courts we likely won’t know the answer to this for some time.