SEC Chair Jay Clayton wrestles with whether cryptocurrencies are in fact securities

Colleagues, is Bitcoin a security? The answer you receive likely will depend upon to whom you ask the question. As of June 2018 Jay Clayton does not consider Bitcoin as a security according to the 1933 Securities Act. To paraphrase his rationale may be a little risky, nonetheless, we will do our best. Clayton’s definition of a security is when an investor provides funds to a designated third party and expects to receive – with some level of risk – a return on his or her investment. Traditional IPO stocks most definitely meet his definition of a security. Enter the emerging universe of ICOs. Now the definition become much more blurry. All indications are that Clayton’s view is that ICOs border on pure “speculation” regarding the investors’ expectation of a return. So which firms and/or products do meet the definition of a security? Surely any public company which produces a digital or tangible product related to the cryptocurrency or the broader Blockchain ecosystem are securities. So where does this leave ICOs and the currencies they represent? The Cryptocurrency Academy perceives a rather large black hole … at least for the foreseeable future. This phenomenon is not uncommon when the rate of technology innovation outpaces the government’s due diligence to define and enforce regulations. We predict that this issue will be resolved, but not for another 2-3 years leaving ICOs and potential investors hanging in the balance. Share a comment and subscribe today! Lawrence, Cryptocurrency Academy (https://cryptocurrencyacademy.blogspot.com)