SEC Chair Jay Clayton asserted that bitcoin and other cryptocurrencies that are replacements for U.S. dollars or other sovereign (fiat) currencies do not constitute securities under federal securities laws (see Securities Act Section 2(a)(1); Exchange Act Section 3(a)(10)).
In an interview on CNBC, Mr. Clayton contrasted cryptocurrencies with other blockchain technologies, such as tokens, in which money is invested in a venture in exchange for a direct return on the token, or for the ability to earn a return by selling the token on a secondary market. These types of tokens are considered securities, and both their issuance via initial coin offerings (“ICOs”) and their trading on an exchange are subject to SEC registration and oversight. Mr. Clayton said that if an unregistered ICO is to be conducted via an unregistered private placement, the SEC will expect adherence to the private placement rules.
Mr. Clayton ruled out amending the statutory definition of securities to expressly address cryptocurrencies and other blockchain technologies, saying that the SEC would not “do any violence to the traditional definition of security that has worked for a long time.” He also declined to comment on whether various specific bitcoin alternatives, or “Altcoins” – such as Ethereum and Ripple – constituted securities, saying instead that the analysis of each was effectively case-specific.
When asked about the current bitcoin futures market and what criteria issuers would need to meet in order to start a bitcoin exchange-traded fund, Mr. Clayton cited guidance from the Division of Investment Management on features the SEC will look for – such as accurate pricing and asset verification – before approving any asset class.