Will altcoins be recognized as securities in the US?
The discussion about the fundamental differences between cryptographically secure tokens issued by blockchain projects and securities issued by public companies for trading on the stock market has reached the level of legislative initiatives.
If we recall the illustrative litigation case between the Securities and Exchange Commission (SEC) and Ripple, we will see that the matter of the claims of the state regulator is still the same: the XRP token is allegedly a security and not a “useful” token, which means that its issuance and selling are illegal.
Meanwhile, Ripple’s line of defense revolves around a curious precedent: the former director of the SEC Division of Corporation Finance, William Hinman, in a similar case against Ethereum in 2018, found that ETH “probably is not a security.”
The Hinman’s “probably” didn’t quite look like a transparent law, wouldn’t you agree? “The killer is probably Johnson so we will put him in jail. But Peterson, probably, was not the killer so that he can be released.”
Due to such conflicts, the cryptocurrency market remains immature in its relations with the law even though it’s not its fault. It kind of looks like “age-related diseases” when some problems directly result from progress.
In the last few days, the community has been discussing a new bipartisan bill by U.S. Senators Cynthia Lummis and Kirsten Gillibrand. They are known for their public position in favor of crypto. The whole point of the future law is to deregulate the market, although, as former SEC employee Tyler Gellasch commented, “it just sounds good.” As we’ll discover further, his words are not far from the truth.
Source: https://twitter.com/adamscochran
Key points of the bill:
While the project categorizes Bitcoin and Ethereum as “commodities”, most altcoins are at risk of being among the “securities”. Thus, almost 60% of the crypto pie is taken away from the SEC’s grip in the “favor” of the CFTC. But there is an issue (considering the mentioned case of the SEC against Ripple): will the Commission be following the “one size fits all” principle? For example, the recent SEC claims against the Binance exchange and their native BNB token follow the same pattern as the XRP case.
Tyler Gellasch believes that such a law “pulls away a ton of investor protections from crypto”. He also said that the bill’s meaning is not to improve conditions but to “search for loopholes”. In addition, he is confident that any new laws on digital assets raise issues that the existing legislation has already solved.
Adam Cochran, the managing partner at Cinneamhain Ventures, called the bill a “rough stuff”, adding that “overall this gives US crypto clarity, but it will have a huge cost and growing pains”.
Amazingly, this story coincided with the overtly bearish market sentiment with Bitcoin’s return to the 2021 lows. Additional stones have fallen on the scales of a prolonged crypto winter…
