A group of more than a dozen lawmakers from the U.S. Congress has sent a letter to Jay Clayton, chairman of Securities and Exchange Commission (SEC), calling for regulatory clarity on cryptocurrencies and other digital assets.
So far, the SEC has treated the majority of cryptocurrencies and digital assets as securities. To be considered as securities, the SEC makes use of the Howie Test. Cryptocurrencies labeled as securities will be treated like any other financial instrument like stocks. Meanwhile, Bitcoin and Ethereum are considered commodities instead of securities. Overall, up until now, there’s no clarity on how the SEC treats these cryptocurrencies and digital assets.
According to the SEC chairman, the definition of ‘securities’ cannot be changed in order to accommodate the cryptocurrencies and that they cannot change the existing laws without the participation of Congress. After this letter, it looks like Congress may finally participate and update rules and regulations regarding the same.
An excerpt from the letter reads, “It is important that all policy makers work together toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately, through formal guidelines or legislation”.
According to the letter, the current state of uncertainty surrounding the treatment of digital assets is hindering innovation in the United States which will drive the business elsewhere. “We believe that the SEC could do more to clarify its position”, the letter read.
The letter also requested some clarity regarding what ICOs are security sales or utility token sales. The letter read “Please expand on what criteria the SEC is currently using – specific to digital tokens- to determine under what circumstances the offer and sale of a digital token should properly be considered an “investment contract,” and therefore, and offer or sale of “securities” under the Securities Acts and the Howey Test.
While crypto investors have been asking the SEC to come forward with clarification on the matter for a long time now, this letter marks the first time people from the government are urging the SEC to clarify the stance. Many experts believe that it’s just a matter of time before the regulatory bodies clarify their position for this new asset class and fresh capital pours in the market.