Cryptocurrency Regulation: Is It A Security?
The Securities and Exchange Commission (SEC) and other US market authorities are taking the crypto market seriously. The second half of the crypto portmanteau reveals the currency, a conscious decision made by the movement’s founders to emphasise their aim to replace fiat currencies as a store of value. Since the birth of Bitcoin (BTC) in January 2009, crypto has become the “Wild West” of financial markets. Its decentralised structure previously shielded it from the prying eyes of governments and other regulatory organisations.The sec coinbase inquiry is still under wraps.
Gensler of the SEC believes that cryptocurrencies are securities:
SEC Chair Gary Gensler has publicly expressed his dissatisfaction with the status of cryptocurrency regulation. In June, Gensler famously stated that crypto exchanges that do not cooperate with the sec coinbase are “working outside of the law” and may face enforcement action. The claim that cryptocurrencies are securities is central to Gensler’s push for becoming the SEC the crypto sheriff.
The Howey Test derives from a 1946 Supreme Court decision in SEC v. W.J. Howey Co., which gets confirmed multiple times in the courts. A transaction is deemed a security under the Howey Test if it fits the four conditions listed below:
- Money gets invested:
- There is an anticipation that the investment will benefit.
- The investment is in a joint venture.
- Profits are made via the labour of others.
The SEC and Ripple:
The SEC has charged Ripple, stating that its XRP transactions constitute unlawful securities offers and that “they raised over $1.3 billion through an unregistered, continuing digital asset securities offering.”Ripple responds by stating that XRP is a virtual currency, not an investment contract, and hence is not subject to SEC securities rules.
Cryptocurrency Regulations and Cryptocurrency Prices:
Regardless of how cryptocurrency legislation develops, many industry professionals feel that future supervision and regulation will eventually help stabilise the pricing of digital assets.
Since the fourth quarter of 2021, cryptocurrency prices have been on the free slide. Many individual investors believe that a bottom is not reached. Even the Chinese government now predicts that Bitcoin will reach zero. Of course, such a remark may be enough to drive many individual investors away from the asset class, compounding its losses. The price of cryptocurrency is now plummeting, but the genie has escaped. Even if Bitcoin does “fall to zero,” it may be difficult to fathom a world without cryptocurrencies. And, if regulation is indeed the key to stabilising crypto prices, competition in that area may allow for the emergence of new crypto leaders.
The SEC is allegedly investigating cryptocurrency exchange Coinbase for securities violations:
Cryptocurrency exchange Coinbase is under investigation by the US Securities and Exchange Commission (SEC) for allowing customers to trade unregistered securities.
The SEC’s inquiry is still under wraps. According to sources close to the case, the SEC began looking into Coinbase’s operations when the exchange introduced over 100 new currencies to its platform, including Dogecoin, the funny cryptocurrency. These currencies often perform well once they are first published, but they are volatile, and their value typically fades over time. The SEC accused the three of insider trading earlier this month, stating that Ishan “repeatedly tipped the time and substance of impending listing announcements” to his brother and friend, resulting in $1.1 million in profits.